Finally, the much-awaited India-US trade deal was announced late on the night of February 2, which is likely to back the bulls on February 3 by driving a 500-700 point gap-up opening on the Nifty 50, according to experts.

As per the last check at 6:51 IST, the GIFT Nifty was trading with gains of 787 points.

The expected rally suggests that the index may see strong follow-up buying interest on Tuesday, in addition to the over one percent (260 points) gains recorded in the previous session. In that session, the index formed a long bullish candle with a lower shadow on the daily timeframe, which also resembles a piercing line–type pattern (not a classical one). This pattern generally acts as a reversal signal and was formed after a long red candle in the previous trade, indicating a positive bias.

The formation of a piercing pattern, which is a reversal pattern, near important support zones provides early signs of a positive reversal, although the short-term trend for the Nifty 50 index remains negative to sideways, said Aditya Thukral, Founder & Analyst at AT Research & Risk Managers.

Meanwhile, US President Donald Trump announced a trade deal with India on Monday, reducing the tariff rate on Indian goods to 18 percent from 50 percent, on the condition that India should stop buying Russian oil and lower trade barriers.

Prime Minister Narendra Modi also agreed to stop buying Russian oil and to buy much more from the US and potentially from Venezuela.

Notably, the index climbed well above the lower Bollinger Bands and also scaled above the trendlines, which had acted as support before the recent sharp fall.

“The Nifty is expected to deliver one of its biggest positive reactions on Tuesday as the much-awaited US–India trade deal has been announced, with GIFT Nifty indicating a big gap-up opening, further fuelling strong sentiment on the Street,” said Arun Kumar Mantri, Founder of Mantri FinMart. He added that the major key resistance is placed at 25,800 and 25,850 for the near term, while the key support is placed in the 24,950–25,000 zone.

Price action in the index in the last trading session was positive, with prices concluding near the day’s high above the 25,000 mark, led by gains in index heavyweights, he said.

If the momentum indicators align with the rally, a further major upmove could be possible in the following sessions. The RSI showed a positive crossover on Monday by rising above the signal line to 39.20, while the MACD remained below the reference and zero lines, though the histogram signalled that weakness had faded somewhat.

On the daily chart, a bullish divergence in RSI is visible following an extended corrective phase, indicating weakening downside momentum and the possibility of a trend reversal, Jigar S Patel, Senior Manager - Equity Research at Anand Rathi said.

Additionally, the Put–Call Ratio (PCR) recovered sharply to 0.95 after slipping to 0.44 intraday, suggesting improved sentiment and a more balanced derivatives setup.

Taken together, these technical and derivative indicators point toward a potential resumption of bullish momentum in the near term, provided the index sustains above key support levels, Jigar said.

According to Mantri, massive short-covering is expected to fuel further momentum in the markets, as heavy short positions remain in the system from the past few days, with FIIs still holding large short positions in derivatives, especially in index futures.

Traders should closely observe the price-volume action of the index in the first hour of trade and assess whether gains are being sustained after the gap-up opening, he suggested.

Meanwhile, the cooling off in India VIX by 8 percent to 13.87 also supported bulls in the previous session. If the volatility index extends its sharp fall in the following sessions, bulls may gradually enter a comfort zone with slowly declining uncertainty.

From positioning in the derivatives segment, aggressive long build-up along with aggressive short-covering suggests that a strong reversal could be on the cards, said Aditya Thukral of AT Research & Risk Managers.

According to him, a complete reversal in prices can be witnessed once prices start sustaining above 25,460, which is the lower high of the current fall. “A strong close above 25,500 would further validate this reversal pattern. However, prices may consolidate around the 25,500 level even if a sharp reversal is seen,” he said.

Weekly options data suggests a broad trading range of 24,800–26,000 for the Nifty 50, as a break on either side of this range could give firm direction to the index.

According to Mantri, sectors such as IT, textiles, garments, pharma, and gems & jewellery, followed by other important areas like defence, seafood, and electronics, will remain in the limelight throughout the day.

On the other hand, the agriculture sector has to be watched keenly, as it was the major hurdle between the two countries during trade deal negotiations, he said.