Markets to tread cautiously as trade deal with US delayed

This week, Indian equities are expected to trade in a range-bound manner, with intermittent volatility as there is continued focus on US tariff-related headlines and global geopolitical developments. Stock-specific action would remain prominent amid ongoing Q3 earnings announcements.

Overall, sentiment is likely to stay cautious due to sustained FII outflows and lingering uncertainty surrounding the India–US trade deal, while investors also await the US Supreme Court’s potential ruling on the legality of tariffs imposed by the Trump administration. Key macro-economic data due this week includes US and China’s Quarter-on-Quarter gross domestic product (GDP), US retail inflation (Consumer Price Inflation), Bank of Japan’s interest rate decision, US and India’s manufacturing and services PMI amongst others.

Last week, markets ended on a flat note as lacklustre trading kept price action subdued. Nifty50 closed marginally higher by 19 points at 25,694 (+0.1%). Nifty Midcap100 and Smallcap100 indices gained +0.1% and +0.4% respectively. Sectorally, Nifty PSU Bank index was the top gainer, rising 4.7%, followed by Metals which rose 4.4% during the week amid continued buying momentum.

Meanwhile, Nifty Realty and Pharma indices witnessed selling pressure, declining -2.4% each. Indian equities faced volatility, following latest comments from the US President on imposing an additional 25% tariff on key trading partners of Iran. Further, investor sentiments were dampened by intensifying FII selling, with cumulative outflows for January (till 15th Jan), crossing Rs 21,500 crore.  

In a sectoral update, Cement demand has continued its healthy momentum in January 2026, with industry volumes growing at an estimated 7–8% year-on-year, while key companies saw even faster growth of around 10%. This comes after a relatively weak phase in 2025, which had pressured prices—especially in the South and East. The prices, which softened in October–November 2025, are now showing signs of recovery, with recent hikes of Rs 5–15 per bag in the trade segment and Rs 10–15 per bag in the non-trade segment being largely accepted across regions. Given the current strong demand momentum, busy construction period of January-June, and underperformance of cement stocks in the last one year, we believe that cement stocks are poised for a near-term uptick.

On the earnings front, major IT companies reported better than expected Q3 results. TCS earnings were broadly in line, with steady deal momentum supporting growth visibility despite choppy demand signals. HCL Tech delivered a strong quarter, beating estimates on revenue and EBIT margin, and raised its FY26 revenue growth guidance.

Meanwhile, Infosys also reported better than expected results with the management upgrading guidance for FY26 CC revenue growth to 3-3.5% (from 2-3% earlier). The guidance upgrade is a positive step towards the expected AI services inflection in 2026. 

Overall, near-term market direction is likely to remain driven by global developments, macro data prints and earnings-related cues. While external uncertainties and FII flows could keep benchmarks range-bound, supportive domestic macros, policy continuity and improving earnings outlook provide a constructive medium-term backdrop for Indian equities.

(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Limited)