The Indian stock market is expected to be influenced by a combination of factors this week, including developments in the potential US-India trade deal, the ongoing Q1 earnings season, and the activity of Foreign Institutional Investors (FIIs).
US-India Trade Deal
The United States and India are continuing trade negotiations, with the US set to reinstate suspended reciprocal tariffs starting August 1, 2025. However, India has been given a three-week reprieve as discussions with Washington progress. While some countries may face steep new duties, there is optimism that the US and India are nearing a trade agreement.
President Trump has indicated progress in the trade deal with India and has excluded India from the list of countries facing tariff ultimatums. However, he also warned of a potential 10% tariff on BRICS nations, which could impact India. India's negotiating team has been in discussions with the US Trade Representative, but key disputes remain unresolved. India is prioritizing sustained access for labor-intensive goods like textiles and footwear, as well as auto component exports. The US, however, is reportedly unwilling to offer concessions on steel.
Negotiations are ongoing, and India is firm on protecting its interests in the agriculture and dairy sectors. While mutual tech and defense cooperation have increased, hurdles remain in lowering trade barriers for steel and agricultural products.
Q1 Earnings Season
The Q1 earnings season is underway, and corporate earnings are expected to show modest top-line growth, with aggregate sales projected to rise in single digits. However, net profits are likely to grow around 12% year-on-year, driven by strong performance in oil marketing companies (OMCs) and the banking, financial services, and insurance (BFSI) sector.
Several major companies are expected to release their Q1 results. HCL Technologies is expected to report muted profits, with guidance in focus. TCS's Q1 results have already been released, with analysts noting that the company's shares slid after the revenue disappointed.
Analysts have issued cautious outlooks for select Nifty heavyweights, with some predicting double-digit declines in net profit for companies like IndusInd Bank, Tata Motors, Coal India, Maruti Suzuki, and ONGC. However, some companies are expected to see significant profit growth, particularly in the oil marketing and healthcare sectors. Overall, the first quarter of FY26 is seen as a "crossover quarter," with the potential to transition from low single-digit earnings growth to a more robust double-digit trajectory.
FII Activity
Foreign Institutional Investors (FIIs) are key players in the Indian stock market, and their activity can significantly influence market trends. FIIs include entities like sovereign wealth funds, investment trusts, and mutual funds from other countries. Understanding the flow of investments by these institutions can provide insights into potential market movements.
FII data reflects the sentiment and confidence of institutional investors in the Indian economy and market. FIIs often deal in large volumes, and their trading activities can impact stock prices and market trends. When FIIs are net buyers, the stock markets tend to perform well, and vice versa.
Recently, FIIs have exhibited a selling trend in Indian equities, with outflows of ₹555 crore in July. For the year 2025 so far, FPI outflows have reached ₹1 lakh crore. On July 11, 2025, FIIs were net sellers in the capital market segment, with outflows of ₹5,104.22 crore.
