The commencement of the new financial year (FY26) has been met with a sense of caution in the market, primarily influenced by the imposition of higher-than-anticipated tariffs by the United States. Market experts suggest that any positive developments from the ongoing India–US bilateral trade negotiations could act as a catalyst for market recovery.

Certain sectors, notably IT and metals, have demonstrated underperformance relative to the broader market. This is indicative of growing apprehension regarding the US economic outlook and the potential for retaliatory trade measures from other nations. Vinod Nair, Head of Research at Geojit Investments Limited, emphasized that investors are likely to closely monitor any countermeasures implemented by global trade partners, as these could exacerbate geopolitical and economic uncertainties. The sustained rally in gold and bond prices reflects this cautious sentiment, highlighting a shift toward safe-haven assets.

Benchmark indices have experienced a decline for the second consecutive session, falling by over one per cent each. This downturn is attributed to a risk-off sentiment pervading global markets, fueled by fears of a trade war resulting from US President Donald Trump's reciprocal tariffs, according to a Bajaj Broking Research note. The Nifty index was down by 345.65 points, or 1.49 per cent, standing at 22,904.45. Investors are concerned that aggressive trade policies from the US could provoke retaliatory actions from other countries, potentially escalating into a full-scale trade war. Such a scenario could disrupt global supply chains and impede economic growth.

The broader markets have witnessed a significant decline, with the Nifty Midcap 100 and Nifty Small cap 100 indices falling by 2.91 per cent and 3.56 per cent, respectively. All sectoral indices have traded with substantial cuts, with the IT, Auto, Pharma, PSU Bank, Realty, Oil and Gas, and metals gauges experiencing losses ranging from 3 per cent to 6 per cent.

The index is currently positioned around a key support area of 22,700-22,800. Maintaining this level is crucial for a potential pullback towards the previous week's high of 23,565 in the coming week. Bajaj Broking Research noted that failure to hold above the support area of 22,700 could lead to a further decline towards 22,300 levels. Market participants will also closely monitor the RBI monetary policy outcome and the resumption of the Q4 FY25 earnings season, alongside developments in US tariff policies.

Investor attention is also focused on the upcoming MPC meeting, with the benchmark interest rate decision anticipated next week. A favorable outcome could benefit rate-sensitive sectors. Additionally, key macroeconomic indicators, including India’s inflation figures and US jobless claims, will be closely scrutinized for insights into the underlying economic conditions in both regions.

Market focus is progressively shifting towards the forthcoming corporate earnings season. The initial outlook remains subdued, with the potential for further downward revisions to earnings growth, largely due to tepid demand and ongoing margin pressures.