Dalal Street week ahead: Trump tariffs, inflation data among 5 key factors to drive Indian stock market in coming week

Mint

4 days ago

Dalal Street week ahead: The Indian stock market benchmarks, the Sensex and the Nifty 50, have been in negative territory for the last six consecutive weeks.
Both key indices declined nearly 1 per cent in the week ended Friday, August 8. The broader market fared worse, with the BSE Midcap index falling 1.3 per cent and the Smallcap index slipping nearly 2 per cent.
Much of this weakness can be attributed to the steep tariffs imposed by US President Donald Trump on Indian imports to the world's largest economy. Cumulative US tariffs on Indian goods now stand at 50 per cent. Even more concerning is Trump's increasingly aggressive stance against India.
The coming week is holiday-truncated; the Indian stock market will be closed on Friday, August 15, to celebrate Independence Day.
Trump's tariff tantrums will remain a key factor dictating market trends next week. Inflation prints and foreign capital flows will also be among the crucial triggers for the domestic market.
Trump imposed a steep 50 per cent tariff on Indian imports and said that the US's trade negotiations with India would remain on hold until the ongoing tariff dispute was resolved.
Trump's unpredictability and aggressive tone are serious concerns for the Indian stock market. Some experts estimate the current tariff will shrink India's GDP growth by as much as 1 per cent.
Negotiations are expected to start and bear positive fruit for India, with tariffs eventually coming to 15-25 per cent. The domestic market will keep a close eye on signals on the trade negotiation front.
India's tariff is higher than that of its export rivals, such as 20 per cent for Bangladesh and Vietnam and 30 per cent for China.
Meanwhile, a trade deal between the US and China may accelerate foreign capital outflow from India, further damaging the Indian markets.
Media reports suggest that the US and China are making significant progress toward securing a deal before the August 12 deadline.
There could be a temporary deal between Washington and Beijing for now, and a final deal may be announced after Trump's scheduled meeting with Chinese President Xi Jinping before the end of this year.
In the coming week, India and the US CPI (Consumer Price Index)-based inflation prints will be in the market's focus.
India and the US will release their July CPI inflation data on Tuesday, August 12. India's July WPI inflation data will be out on Thursday, August 14.
India's July inflation is expected to further decelerate to 1.8 per cent from 2.10 per cent in the previous month. US CPI, on a year-on-year basis, may come to 2.8 per cent in July compared to 2.7 per cent in June.
India's inflation is expected to remain benign in FY26. After the August MPC meeting, the Reserve Bank of India trimmed its FY26 CPI inflation forecast to 3.1 per cent from 3.7 per cent earlier.
On the other hand, concerns are rising that Trump's tariff policies will stoke inflation in the US and drag the economic growth, potentially creating a stagflationary situation in the world's largest economy.
A spike in US inflation will further dim the prospects of US Federal Reserve rate cuts, which will be negative for emerging markets like India.
The US President and his Russian counterpart, Vladimir Putin, will meet in Alaska on Friday, August 15. This event will be in focus across the globe as it may potentially pave the way for the end of the Russia-Ukraine war, which has been going on since February 24, 2022, when Russia invaded Ukraine.
The two leaders will 'focus on discussing options for achieving a long-term peaceful resolution to the Ukrainian crisis,' Kremlin adviser Yuri Ushakov said, adding, 'This will evidently be a challenging process, but we will engage in it actively and energetically.'
Foreign portfolio investors (FPIs) have been on a selling spree of Indian stocks since July.
In the cash segment, FPIS sold Indian stocks worth ₹ 47,666.68 crore in July, while so far in August, they have offloaded stocks worth ₹ 14,018.87 crore.
However, they bought Indian equities worth ₹ 1,932.81 crore in the cash segment on Friday, August 8.
It is too early to say whether the trend of FPI buying will sustain, as tariff uncertainty and unimpressive earnings keep the short-term outlook of the market hazy.
Meanwhile, the movement of the US dollar and treasury yields will also affect the foreign capital flow.
Last week, the US dollar index dipped almost 1 per cent, while the benchmark 10-year bond yields rose 1.5 per cent, snapping a two-week losing streak.
If FPIs continue buying Indian stocks, this will underpin the domestic market, potentially helping the benchmark indices break out of their range since June.
Market participants will also focus on some of the key earnings this week. According to the BSE, over 2,000 companies will announce their June quarter results in the coming week. Among the major ones that will release their earnings are Bajaj Consumer Care, Ashok Leyland, ONGC, IOC, Hindalco Industries, BPCL, and Hindustan Copper.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.