India’s markets opened on Monday with cautious optimism after a US court ruling against tariffs. The Indian Rupee rose slightly after hovering near 91 per dollar on Friday.
Earlier this month, US tariffs on India fell from 50% to 18% after the first part of a bilateral trade agreement. After the ruling, the 18% reciprocal tariff under IEEPA is expected to be treated as invalid.
After the ruling, India’s tariff treatment is expected to return to MFN terms, plus a 15% umbrella levy for 150 days. Key sectors remain exempt, and any further economic boost is expected to be limited.
Looking back at 2025, the Indian rupee saw a small relief rally after a US court struck down the 18% tariff. But the tariff had already dropped from a much higher 50%, so the biggest market impact was already priced in. The rupee moved up from near 91 per dollar, but the rally stayed cautious.
After that ruling, USD/INR found a new balance. It traded mostly between 89.50 and 90.75 through late 2025. Data from the next two quarters backed up the idea that the lift was modest. Non-exempt exports to the US rose only 2.1%. This steady trading showed the market viewed the ruling as removing a major risk, not as a new growth driver.
For derivatives traders, the main change was lower implied volatility in USD/INR options. With the tariff overhang gone, uncertainty eased. One-month implied volatility fell from above 8% to about 6% in the weeks after the 2025 ruling. That helped strategies that do well in range-bound markets with falling volatility.
Because of this, selling option premium—using strategies like short strangles—worked well through much of the second half of 2025. With smaller expected moves, selling calls and puts outside the expected range generated steady income. Still, traders kept an eye on the 150-day window for the replacement 15% umbrella levy, since it could later change the outlook.
In early 2026, the key point is that this low-volatility period may be ending. New trade talks are rumored to be coming. Data from 2024–2025 shows that even early talk of tariffs can quickly push volatility higher. Traders may want to add protection with long vega positions or use options to hedge against a potential breakout from the established range.
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