The commencement of the new financial year (FY26) has been marked by a cautious atmosphere 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 ongoing bilateral trade negotiations between India and the US could act as a supportive factor for the market.

Certain sectors, notably IT and metals, have shown underperformance relative to the broader market. This is attributed to increasing concerns regarding the US economic outlook and potential retaliatory trade measures from other nations. Vinod Nair, Head of Research at Geojit Investments Limited, noted that investors are likely to closely monitor countermeasures implemented by global trade partners, which could further intensify geopolitical and economic uncertainty. This sentiment is mirrored in the sustained increase in gold and bond prices, signaling a notable shift towards safe-haven assets.

Benchmark indices have extended their losing streak for a second consecutive session, declining by over one per cent each on Friday. This decline reflects a risk-off sentiment prevailing in global markets, spurred by fears of a trade war following 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, settling at 22,904.45. Investors are concerned that aggressive trade policies by the US could trigger 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.

Broader markets experienced a significant downturn, 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 traded with substantial declines, with the IT, Auto, Pharma, PSU Bank, Realty, Oil and Gas, and metals gauges dropping by 6 per cent to 3 per cent.

The index is currently positioned around a key support area between 22,700 and 22,800. Maintaining levels above this range is crucial for a potential pullback towards the previous week's high of 23,565 in the coming week. Bajaj Broking Research indicated 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, in addition to developments in US tariff policies.

Investor focus is also directed towards the upcoming MPC meeting, with the benchmark interest rate decision expected next week. A favorable outcome could benefit sectors sensitive to interest rates. Furthermore, key macroeconomic indicators, including India’s inflation figures and US jobless claims, will be closely analyzed for insights into the underlying economic conditions in both regions.

Market attention is also gradually shifting towards the forthcoming corporate earnings season. The initial outlook remains subdued, with a risk of further downward revisions to earnings growth, largely due to sluggish demand and ongoing margin pressures.