The Indian stock market has been trading in a rangebound manner recently due to a combination of domestic and global factors. Several key reasons contribute to this consolidation, including uncertainties surrounding the India-US trade deal, Q1 2025 results, global economic challenges, and the influence of foreign institutional investors (FIIs).

1. India-US Trade Deal Uncertainty

The progress of the India-US trade deal is a major factor influencing market sentiment. Negotiations between the two countries have been ongoing, with the goal of expanding trade and offering preferential market access to businesses. However, disagreements persist regarding key issues such as tariff reductions on agricultural products and market access for US goods.

The US is seeking greater access to India's agricultural and dairy markets and lower tariffs on industrial goods and digital services. India, however, remains firm on protecting its agriculture, dairy, and data sovereignty policies. A successful deal could boost bilateral trade, improve export opportunities for Indian industries, and enhance investor confidence. Conversely, failure to reach an agreement could lead to increased tariffs and negatively impact market sentiment.

The looming deadline for a 26% reciprocal tariff on Indian exports has added pressure to the negotiations. While some expect an interim deal to be finalized, the uncertainty surrounding the terms and potential impact of the trade agreement has contributed to the market's rangebound movement.

2. Q1 2025 Results

The Q1 2025 earnings season is underway, and corporate earnings are playing a crucial role in shaping market direction. Weaker-than-expected results in some sectors have raised concerns about corporate growth, while positive earnings in others have provided some support. For example, Tata Communications' shares jumped after announcing the date for its Q1 results.

Analysts are closely monitoring the Q1 results to assess the overall health of the Indian economy and the impact of various factors on corporate profitability. The performance of key sectors such as IT, banking, and consumer goods will be particularly important in determining market sentiment. Mixed sectoral performances and uncertainty over near-term triggers have contributed to the market's sideways movement.

3. Global Economic Challenges

Global economic challenges are also impacting the Indian stock market. Factors such as geopolitical tensions, trade policies, and US Federal Reserve decisions influence investor sentiment, liquidity, and market volatility. The Russia-Ukraine war, Middle East disputes, and China-Taiwan tensions have constrained the global economy and increased market uncertainties.

Rising inflation, restricted monetary policy in developed countries, and restrained consumer spending in key markets have contributed to a global economic slowdown. These trends have impacted India's export-driven industries such as IT services, pharmaceuticals, and textiles. Additionally, concerns about a potential recession in the US and other major economies have weighed on investor sentiment.

4. FII Flows

Foreign Institutional Investors (FIIs) play a significant role in the Indian stock market. FII inflows can boost market liquidity and valuations, while outflows can lead to market corrections. In early 2025, the Indian equity market faced a shaky start due to geopolitical tensions and FII outflows.

Recently, FIIs have returned as net buyers, injecting funds into the Indian market. However, concerns about global uncertainties and better investment opportunities elsewhere can lead to FII outflows, weakening the Indian stock market. The fluctuating investment patterns of FIIs contribute to the market's volatility and rangebound movement.

5. Other influencing factors

Besides these major factors, domestic flows, a stable local macro-economic and policy environment are supporting the Indian stock market. Climate change and ESG compliance are also emerging as focal points in investment strategies.

In conclusion, the Indian stock market is currently trading in a rangebound manner due to a combination of factors, including uncertainties surrounding the India-US trade deal, the ongoing Q1 2025 results season, global economic challenges, and the influence of FII flows. While the long-term outlook for the Indian market remains positive, these factors are likely to continue to influence market movement in the near term.