**Market Brief: US-India Pact Sparks Rally, Yields Cool** **February 3, 2026** Indian markets surged early Tuesday following a breakthrough **US-India trade agreement**, significantly boosting sentiment across asset classes. The deal, which slashes reciprocal tariffs on Indian goods to **18%**, has catalyzed hopes for robust foreign inflows and a strengthened currency. **Bond Market Reaction** * **Yields Ease:** The benchmark 10-year government bond yield fell to **6.72%**, retreating from a one-year high of **6.78%** seen earlier this week. * **Budget Context:** Bond sentiment remains cautious following the Union Budget’s projection of a higher-than-expected gross borrowing target of **₹17.2 lakh crore** for FY27. * **Buying Support:** The trade deal provided immediate relief, offsetting concerns over the heavy supply pipeline and attracting fresh buying interest. **Currency & Equities** * **Rupee Surge:** The Indian Rupee (INR) rallied over **1.3%** to trade near **90.27** against the US Dollar, outperforming Asian peers. * **Equity Momentum:** Benchmark indices tracked global optimism, with the Nifty 50 reclaiming key levels above **25,700** driven by heavyweights and renewed FII interest. **Key Watch: RBI MPC** Investors are now pausing for the Reserve Bank of India's Monetary Policy Committee (MPC) meeting scheduled for **February 4–6**. * **Consensus:** The central bank is widely expected to hold the repo rate steady at **5.25%**. * **Focus:** Participants await guidance on liquidity management and inflation, particularly given the new fiscal parameters and global tariff shifts. **Outlook** While the trade pact has reset short-term momentum, profit-taking at higher levels is capping further upside. The market’s direction for the remainder of the week hinges on the central bank's commentary on managing the expanded borrowing program.