The domestic equity market may attempt a rebound in the coming week, supported by bargain hunting after the recent sharp correction. However, upside is likely to remain limited as global trade jitters, political uncertainty from Washington and persistent foreign fund outflows continue to weigh on sentiment.
A key trigger will be the much awaited US Supreme Court verdict on the legality of tariffs imposed by former President Donald Trump. Markets are closely watching whether the court strikes down the tariffs fully or only in part. A ruling declaring the tariffs illegal could trigger a relief rally in Indian equities, as India has been among the worst affected, with cumulative tariffs of up to 50%.
Uncertainty around India-US trade relations has intensified after the Trump administration linked higher tariffs to India’s purchases of Russian crude. The proposed bilateral trade agreement remains stuck despite multiple rounds of negotiations, keeping the trade outlook clouded. Fears of even steeper tariffs under US sanctions legislation have added to volatility.
Persistent selling by foreign institutional investors remains another overhang. FIIs have been net sellers for several sessions, exacerbating the recent slide in benchmark indices amid adverse global cues.
From a technical perspective, analysts note that the market has breached key short term support levels, reinforcing near term caution. While oversold indicators suggest the possibility of a technical bounce, a sustained recovery would depend on the market reclaiming critical resistance levels. A decisive break below recent lows could open the door to deeper downside.
On the domestic macro front, market will track a busy economic calendar. December CPI inflation data due on Monday, January 12, will be closely watched for trends in food prices and implications for the Reserve Bank of India’s policy stance. Consumer price inflation had risen to 0.71% YoY in November 2025, from a record low of 0.25% in October.
Attention then shifts to Wednesday, January 14, with the release of December WPI data. Wholesale food prices had declined 2.60% YoY in November, moderating from a sharper 5.04% fall in October.
On Thursday, January 15, markets will track December trade data, including exports, imports and the trade balance. The trade deficit had narrowed to $24.53 billion in November 2025, compared with $31.92 billion a year earlier, according to preliminary estimates. December unemployment data will also be in focus, offering cues on labour market conditions and consumer demand. The unemployment rate fell to 4.7% in November, the lowest level since at least 2018.
Globally, investors will navigate a packed macro calendar. On Tuesday, January 13, the spotlight will be on US December inflation data, with both headline and core CPI readings watched closely for signals on the Federal Reserve’s rate trajectory.
Attention then shifts to China on Wednesday, January 14, with December trade data due, offering insights into global demand trends. Later on Wednesday, the focus returns to the US with producer price inflation (PPI) readings for October and November, followed by November retail sales data. The day will conclude with December existing home sales, providing further cues on the health of the US economy amid elevated interest rates.