This week the market started on a muted note derived from the subdued expectation of the ongoing domestic Q2 result. While escalating US-China trade tensions, highlighted by President Trump’s threat of an additional 100% tariff on China, also dampened global and domestic sentiment at the start of the week.
China has tightened export controls on rare earth elements and other critical minerals essential for electronics production. However, the tension eased temporarily as Trump diminished the tone when the US market reacted negatively. Nevertheless, anti-trade worry continues, and both the parties have plans to increase other barriers like port fees for ships docking as much as $50-60 per tonne.
However, as the global market stabilised, Indian equities got traction with initial good gains from banking and pharmaceutical stocks. Investor sentiment improved after the government invited private sector professionals to lead State Bank of India senior leadership positions, including one MD post. This marks a change in policy to shift toward allowing private participation in public sector enterprises, aimed at enhancing efficiency and governance. Pharma stocks rallied as the US revived the Biosecure Act, aiming to cut biotech ties with flagged foreign firms, especially from China, providing a strong boost to Indian CDMOs.
By midweek, the domestic market inched higher, led by a dovish comment by the Fed chair on a rate cut in the coming policy as the downside risk on the unemployment rate increased, and also considering an end to its quantitative tightening, which sparked the global market sentiment. The US 10-year yield declined while the rupee gained with the support of RBI operation. This is also indicative of a possible momentum shift in FIIs inflows to India, which sold ₹2.5 lac cr in the last one year. However, for this, India’s earnings growth has to improve, regarding which a rebound is expected from Q3 (Dec) onwards with a rise in household spending. Additionally, the MSCI India premium valuation has contracted below its long-term average, suggesting the potential for faster renewed FII inflows if earnings growth materializes.
By week’s end, domestic equities extended their recovery, supported by optimism around India–US trade discussions. An Indian delegation is in the US to negotiate specifics and seek a “win-win” outcome, with both sides tentatively targeting November 2025 to conclude the first phase of the agreement, in line with directives from Prime Minister Narendra Modi and President Donald Trump issued in February 2025.
While near-term momentum remains positive, sustained market performance will depend on earnings growth and commentary from ongoing corporate results and developments in global trade. Sentiment is lifted in expectations of a change in earnings cycle, early signs of FII inflows supported by dovish commentary from the US Fed, and a softer dollar index. FII net brought in ₹8,000cr in the first half of Oct compared to consequently selling off the last 3 months ( ₹80,000). India was amongst the worst emerging market peers in 2025, led by heavy FII selling.
What’s ahead for the stock market?
Now the market is developing as a safe bet on a medium-term basis. Downside risk is limited, while upside risk is opening with change in earnings view, Fed cut and the Indo-US deal.
The market continued its upward momentum, reaching a new 52-week high, largely driven by consumption-oriented stocks anticipating improved volume growth. Global economic disruptions like escalating anti-trade talks and slowing economic data have made investors jittery, prompting them to seek refuge in gold, which has surged to a new all-time high. Despite these global uncertainties, the resilient domestic economic performance has bolstered investor sentiment, keeping Indian equities insulated this week.
The author, Vinod Nair, is Head of Research at Geojit Financial Services.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
