Indian Markets Likely To Post Flat Opening Amid Trade Optimism

India’s stock market is expected to open on a muted note Wednesday despite positive developments from a newly announced India-U.S. trade agreement. While the Indian market received a significant boost from trade deal optimism, broader global headwinds appear to be weighing on momentum entering the new trading session.

Trade Deal Provides Foundation for Sentiment

The India-U.S. trade pact represents a major breakthrough after months of tariff-related uncertainty. Union Minister of Commerce and Industry Piyush Goyal confirmed that sensitive agricultural products and the dairy sector secured protected status under the agreement. The announcement triggered a strong market response, with the benchmark Sensex and Nifty indices each jumping approximately 2.5 percent on Tuesday following President Donald Trump’s unveiling of the trade terms.

The Moody’s Ratings agency provided additional support to market confidence, noting that reduced U.S. tariff rates on most Indian goods would be positive for labor-intensive industries including gems, jewelry, textiles, and apparel. This credit-positive assessment underscored the potential economic benefits flowing to India’s export sectors.

Currency Gains Reflect Investor Confidence

The Indian rupee strengthened notably, gaining 122 paise to settle at 90.27 per dollar. The currency’s appreciation reflected investor optimism about the trade deal’s positive implications for India’s current account and foreign exchange position. However, this rally may not be sustained if global risk sentiment deteriorates further.

Foreign Flows Return to Indian Equities

Foreign institutional investors (FIIs) made a significant comeback to India’s equity markets on Tuesday, breaking a prolonged selling spell with their largest single-day purchases since late October 2025. Data from stock exchanges showed FIIs purchasing shares worth Rs. 5,426 crore in the cash market, while domestic institutional investors (DIIs) added Rs. 345 crore, providing additional support to the Indian equities market.

Mixed Global Signals Keep Markets Flat

Despite the positive trade news, Indian markets face headwinds from international market developments that may ultimately limit upside. U.S. stocks retreated from near-record levels as investors rotated capital away from technology shares toward economically sensitive stocks. European markets ended the session without clear direction, while Asian bourses displayed mixed trading patterns.

The flat to choppy tone reflects uncertainty ahead of major earnings announcements from technology giants Google and Amazon, coupled with forecasts from Advanced Micro Devices signaling a potential decline in first-quarter revenue guidance.

Global Factors Constraining Momentum

Monetary policy messaging from Federal Reserve officials added complexity to market dynamics. Fed Governor Stephen Miran reiterated the case for aggressive interest rate cuts in 2026, while Federal Reserve Bank of Richmond President Tom Barkin suggested the Fed still has “considerable distance to travel” before achieving its dual mandate of maximum employment and price stability.

The U.S. dollar strengthened in Asian trading despite declining in New York, indicating shifting risk appetites. Geopolitical tensions also resurfaced as a threat to sentiment, with gold prices rising more than 2 percent to $5,048 per ounce following renewed U.S.-Iran tensions. Oil prices extended gains after the U.S. military intercepted an Iranian drone in the Arabian Sea, adding an additional layer of uncertainty to global markets.

Outlook for Indian Opening

The Indian market’s flat start reflects the tension between domestic positive catalysts—the trade deal and FII inflows—and global constraints emanating from policy uncertainty, earnings concerns, and geopolitical risks. While the India-U.S. trade agreement provides fundamental support, the Indian equity market remains vulnerable to broader international headwinds that could prevent a sustained rally in the near term.