Indian Stock Market Faces Weekly Decline Amid Trade Deal Uncertainty
The Indian stock market experienced a downturn for the week ending July 4, largely due to profit-taking and ongoing uncertainties regarding the trade deal between India and the U.S. Investors were cautious as they awaited the start of the earnings season and faced foreign capital outflows.
Both the Nifty 50 and the Sensex indices fell by 0.70%, breaking a two-week winning streak.
Ajit Mishra, Senior Vice President of Research at Religare Broking, noted that the decline was mainly driven by investors securing profits. “With key global trade events approaching, there were growing concerns about potential retaliation from the U.S. that raised doubts about finalizing trade agreements with countries like India. Yet, expectations of a possible interim deal between India and the U.S. helped limit the losses,” he explained.
On a positive note, mid and small-cap stocks showed resilience, with the Nifty Midcap 100 and Nifty Smallcap 100 indices gaining 0.50% and 0.30%, respectively, thereby extending their winning streak for a second week.
Looking ahead, the upcoming week is crucial for the markets with several significant factors at play. These include the anticipated India-U.S. trade deal, the start of Q1FY26 earnings, and the release of the minutes from the U.S. Federal Open Market Committee’s last meeting.
Key Factors to Watch in the Coming Week
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India-U.S. Trade Deal
The long-awaited trade agreement between India and the U.S. remains unclear. With a deadline set by U.S. President Donald Trump approaching on July 9, investor anxiety is building. Reports suggest that Indian negotiators just returned from the U.S. Meanwhile, the Indian government has proposed imposing retaliatory duties under World Trade Organization norms against the U.S. Commerce Minister Piyush Goyal emphasized that India will not rush into any agreement without it being fully finalized and in the country’s best interests. -
Q1 Earnings Season
The earnings season for the first quarter of FY26 kicks off next week, with major IT companies TCS and Tata Elxsi set to announce their results on July 10, followed by retail giant DMart on July 11. Analysts will be closely monitoring growth forecasts and insights from company management to gauge market sentiment. -
Monsoon Progress
This year’s monsoon has been robust, with above-normal rainfall reported in June, leading to increased sowing of kharif crops. As the India Meteorological Department forecasts continued favorable conditions, the progress of monsoon remains important for economic stability and inflation. -
Foreign Capital Flows
Foreign portfolio investors (FPIs) have been selling off Indian stocks amidst uncertainties over the trade talks and market valuations. So far in July, FPIs have offloaded equities worth ₹5,773 crore. Continued outflows could keep the market subdued, but experts indicate that FPI buying may resume if clarity emerges on the trade deal and positive earnings trends are observed. -
U.S. FOMC Minutes
Global markets will be closely analyzing the minutes from the U.S. Federal Open Market Committee’s recent meeting to gain insights into how U.S. officials view inflation and growth. The next policy meeting is set for July 29-30, with some speculating about potential interest rate cuts in September.
Overall, the outlook for the Indian stock market remains uncertain as it navigates these critical factors in the upcoming week.
