Indian benchmark indices Sensex and Nifty 50 are expected to open higher on Tuesday, rebounding from Friday's sharp decline following positive global market cues. The recovery comes after markets remained closed on Monday for Republic Day 2026, with Gift Nifty indicating a strong opening for domestic equities.

Market Performance and Opening Indicators

Gift Nifty was trading around the 25,160 level, showing a premium of nearly 81 points from the Nifty futures' previous close, signaling a positive start for Indian stock market indices. This follows Friday's significant sell-off when both benchmark indices witnessed sharp declines amid heightened geopolitical uncertainties and sustained foreign capital outflows.

Key Market Triggers This Week

Market participants will closely monitor several critical developments that could influence trading sentiment. The India-EU trade deal stands out as a major catalyst, with India and the European Union having concluded negotiations for a free trade agreement, and an official announcement expected today. The deal aims to strengthen economic integration between India and the EU, potentially boosting trade and investment flows.

Additionally, the US Federal Reserve's policy meeting, Q3 earnings results, and geopolitical developments will remain key focus areas for investors throughout the week.

Global Market Cues and Tariff Developments

US markets provided positive momentum, with major indices advancing for a fourth consecutive session. The performance was led by strong gains across key benchmarks:

A significant development emerged from US Treasury Secretary Scott Bessent, who signalled the possibility of rolling back the additional 25% tariffs on India. Bessent noted "there could be a path" to removing the levies, citing India's sharply declined purchases of Russian oil following tariff measures imposed by the Trump administration.

Asian Markets and Currency Movements

Asian markets displayed mixed performance after US President Trump announced plans to increase tariffs on South Korea. Japan's Nikkei 225 declined 0.24% while the Topix fell 0.31%. South Korea's Kospi dropped 0.36%, though the Kosdaq rallied 1.41%. Hong Kong Hang Seng index futures indicated a higher opening.

The US dollar hit a four-month low, falling more than 1% year-to-date, with the dollar index at 97.05 after touching a four-month low of 96.808. Meanwhile, gold and silver prices declined sharply, with Comex gold falling 1.16% to $5,023.60 an ounce and Comex silver declining 6.41% to $108.095 an ounce.

Corporate Earnings Update

Axis Bank reported Q3FY26 results showing steady growth, with net profit rising 3% year-on-year to ₹6,489.6 crore and net interest income increasing 5% to ₹14,286.4 crore. The bank's asset quality improved sequentially, with Gross NPA falling to 1.40% from 1.46% and net NPA declining to 0.42% from 0.44% quarter-on-quarter.

India's benchmark equity indices have witnessed substantial declines in January, with both the BSE Sensex and NSE Nifty falling over 4% amid a confluence of domestic and global headwinds. The market downturn reflects persistent foreign fund outflows, currency weakness, and broader global uncertainties that have kept investors cautious.

Market Performance Overview

The equity markets have faced significant pressure this month, with key indices recording notable declines across the board.

Last week alone, the BSE benchmark tanked 2,032.65 points (2.43%), while the Nifty declined 645.7 points (2.51%), highlighting the intensity of the recent sell-off.

Historical January Trends

Market data reveals a pattern of January declines in recent years. In January 2025, the BSE benchmark had declined 638.44 points (0.81%). Similar downward trends were observed in January 2024, 2023, 2022, 2021, and 2020, suggesting a recurring seasonal pattern.

Santosh Meena, Head of Research at Swastika Investmart Ltd, noted that historically, similar pre-budget trends in January have witnessed sharp falls followed by recovery post-Republic Day leading up to the Budget, with market participants hoping for a similar reversal this time.

Key Contributing Factors

Several interconnected factors have contributed to the current market weakness:

• Foreign Portfolio Investor Selling: Aggressive selling by foreign portfolio investors due to global risk-off environment
• Currency Weakness: The rupee hit a historic low of 92 against the US dollar on January 23, slumping over 2% this month
• Geopolitical Uncertainties: Fresh tariff concerns and geopolitical risks creating market volatility
• Global Market Conditions: Elevated crude oil prices and rising global bond yields

Market Outlook and Analysis

Ponmudi R, CEO of Enrich Money, explained that geopolitical uncertainties and fresh tariff concerns have exerted a cascading impact on domestic equities. The global risk-off environment has prompted aggressive selling by foreign portfolio investors, adding pressure on the rupee and reinforcing a defensive stance among investors.

Elevated crude oil prices in international markets, alongside rising global bond yields, have further compounded risk aversion, keeping investors cautious as markets navigate an increasingly uncertain global macro and geopolitical landscape.

According to Axis Securities, with global uncertainty, domestic growth resilience, and fiscal discipline all in play, the Union Budget 2026-27 is expected to strike a balance between growth support and macro stability, which could influence market sentiment in the coming weeks.