Indian stock markets are gearing up for an eventful week ahead, with key domestic and global triggers set to influence trading sentiment. Markets will remain closed on Monday for Republic Day, creating a truncated trading week that begins Tuesday with several critical developments on the horizon.

Key Market Triggers This Week

The week presents multiple significant catalysts that could drive market direction. The Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1, with NSE and BSE conducting live trading on Sunday during the Budget presentation. Additionally, the US Federal Reserve's interest rate decision will be closely watched by global investors.

Major Corporate Earnings

The earnings season will gain momentum with results from several heavyweight companies expected to influence market sentiment:

According to Ajit Mishra, SVP Research at Religare Broking Ltd, markets will also track industrial production data, government budget-related fiscal indicators, and weekly foreign exchange reserves alongside these corporate results.

Market Performance and Challenges

Last week witnessed significant market decline, reflecting multiple headwinds facing investors:

The rupee hit a historic low of 92-a-dollar on Friday, adding to market pressures. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that FPIs not only continued their selling spree in the week ended January 23rd but also increased the intensity of their selling. Sentiments remained weak due to sustained rupee depreciation, lack of finality regarding US-India trade deal, and unimpressive Q3 results.

Budget Expectations and Market Outlook

Investor expectations from the Union Budget are centered around several key areas. Ponmudi R, CEO of Enrich Money, highlighted that expectations are anchored around fiscal prudence, with the fiscal deficit seen at around 4.2-4.3 per cent of GDP, alongside continued thrust on capital expenditure particularly in infrastructure, defence, and railways.

Markets are also factoring in:

• Modest tax rationalisation
• Targeted sectoral incentives
• Policy measures to support MSMEs and export-oriented sectors
• Reforms aimed at improving capital market depth and efficiency

Namrata Mittal, CFA and Chief Economist at SBI Mutual Fund, expects the Union Budget to sustain focus on supporting MSMEs facing tariff-related external pressures, pursue further rationalization of customs duties, maintain emphasis on capital expenditure, and explore measures to incentivize job creation.

Global Factors and Technical Outlook

Globally, focus will remain on key US macroeconomic releases and the Federal Reserve's interest rate decision, along with ongoing developments in global trade policies. Santosh Meena, Head of Research at Swastika Investmart Ltd, noted that trading resumes Tuesday with a potentially positive trigger from India-EU FTA developments slated for January 27th, though geopolitical uncertainties regarding Iran and Greenland remain significant headwinds.

As markets head into the pre-Budget and monthly derivatives expiry week, elevated FII short positions, oversold momentum indicators, and pre-Budget positioning could trigger bouts of short-covering, potentially leading to a mild technical rebound.

HDFC Asset Management Company's Managing Director and CEO Navneet Munot has expressed strong confidence in India's structural growth story, describing the country as a "stock picker's paradise" ahead of Budget 2026. Speaking at the ET Budget Boardroom event in Mumbai, Munot emphasized the importance of policy continuity and sustained reforms in maintaining India's growth momentum.

Policy Continuity and Reform Momentum

Munot praised the government's consistent approach, highlighting that Budget 2026 marks the ninth consecutive budget presentation by Finance Minister Nirmala Sitharaman. He noted that the government has maintained reform momentum without waiting for Budget Day, implementing measures across GST simplification, labour codes, and other structural improvements.

The HDFC AMC chief emphasized that despite global uncertainties, India has continued growing at over 8%, demonstrating resilience in challenging international conditions. He particularly commended the government's decision to present the budget on a Sunday, viewing it as a symbol of the administration's commitment to working continuously for national development.

Market Performance and Investment Flows

Addressing market dynamics, Munot highlighted several key trends shaping India's investment landscape:

Munot acknowledged that while Indian markets have underperformed some global markets due to the AI investment chase, he believes India will emerge as a significant beneficiary in the AI ecosystem. He positioned India as potentially becoming the "use-case capital of the world" for AI applications, creating substantial opportunities for corporate productivity enhancement and market expansion.

Sectoral Opportunities and Manufacturing Focus

The fund manager emphasized India's diverse investment opportunities across sectors, driven by an economy serving 1.4 billion consumers. He highlighted government initiatives supporting manufacturing growth:

• Corporate tax reduction measures
• Production Linked Incentive (PLI) scheme implementation
• Logistics infrastructure improvements
• Indigenization and procurement from Indian companies
• Energy transition and EV adoption initiatives
• Semiconductor manufacturing promotion

Munot stressed that these measures across manufacturing, energy transition, and new-age technologies position India to participate in multiple growth opportunities spanning various sectors.

Budget Expectations and Policy Recommendations

The HDFC AMC CEO outlined three key expectations from Budget 2026:

Munot particularly emphasized the potential of unlocking trillions of dollars currently locked in physical assets like gold and silver, noting that India imports large quantities of these metals annually. He suggested fiscal incentives could redirect this wealth toward capital markets, benefiting overall economic growth.

Future Growth Drivers

Looking ahead, Munot expressed confidence that continued government focus on capital expenditure, fiscal consolidation, and RBI support through liquidity measures and interest rate adjustments will collectively drive higher earnings growth. He emphasized that India's structural advantages, combined with ongoing reforms and the potential AI revolution, create a favorable environment for long-term investment opportunities across multiple sectors and market segments.