US-India Trade Talks and Q1 Earnings Impacting Indian Stock Market

The Indian stock market experienced a decline for the third consecutive week, with major indices, including the Sensex and Nifty 50, closing lower on July 18, 2025. The Nifty 50 fell below the pivotal 25,000 mark, settling at 24,968.40, while the Sensex dropped to 81,757.73, reflecting a cumulative loss of approximately 3% over the past three weeks. Investor hesitation stemmed from a lack of positive momentum in earnings reports and ongoing uncertainty regarding the US-India trade agreement.

According to Ajit Mishra, Senior Vice President of Research at Religare Broking Ltd, the decline was exacerbated by disappointing earnings results, particularly from Axis Bank, which led to cautious sentiment ahead of additional earnings reports from key financial institutions such as HDFC Bank and ICICI Bank. Furthermore, the anticipated earnings release from Reliance Industries, scheduled for the same day, contributed to the market's cautious stance.

The stock market's downward trend this week also reflected broader concerns about the ongoing negotiations for a Bilateral Trade Agreement (BTA) between the United States and India. This fifth round of discussions, held in Washington from July 14 to 17, was led by Rajesh Agrawal, India's chief negotiator in the commerce department. Both nations aim to finalize an interim trade pact before August 1, coinciding with the expiration of the Trump-era tariffs that imposed additional duties on imports from India. This trade agreement is seen as critical for improving bilateral trade relations and stabilizing market conditions.

In the macroeconomic landscape, key indicators such as India's Infrastructure Output and HSBC's Flash PMI data for manufacturing, services, and composite sectors are slated for release, and are expected to influence market sentiment. The ongoing earnings season is also a focal point, with major companies including Infosys, Dr. Reddy’s Laboratories, Bajaj Finance, Nestle India, and Cipla set to announce their quarterly results, which could sway investor confidence.

The activity of Foreign Portfolio Investors (FPIs) has further complicated matters, as they offloaded shares worth ₹3,694 crore in Indian equities while Domestic Institutional Investors (DIIs) made net purchases of ₹2,820 crore, according to provisional data from the National Stock Exchange. This trend has persisted throughout the year, with FPIs emerging as net sellers of equities valued at ₹1.32 lakh crore, contrasting sharply with DIIs' total net purchases of ₹3.67 lakh crore.

As for commodity markets, crude oil prices remained steady amid mixed signals regarding U.S. economic developments and ongoing geopolitical tensions. On July 18, Brent crude closed at $69.28 per barrel, while U.S. West Texas Intermediate (WTI) finished at $67.34. Gold prices, on the other hand, rose slightly, attributed to a weaker U.S. dollar and persistent global economic uncertainties.

Looking ahead, analysts from Bajaj Broking have indicated that the Nifty index must maintain above the 24,900 support level to avoid further downward pressure, with potential declines towards 24,600-24,400 if this threshold is breached. Conversely, a hold above this level may enable a technical rebound towards last week's high of 25,255.

The upcoming week will be pivotal as stakeholders monitor the earnings reports from key players in the market, the outcomes of the US-India trade negotiations, and macroeconomic indicators that could provide insights into market direction. Investors are advised to maintain vigilance and consider expert recommendations as they navigate this uncertain market landscape.