Early support from positive US and Asian market cues, coupled with DII participation, may offset selling pressure. Key events ahead include the Union Budget and clarity on US-India trade timelines.
Indian equity markets are likely to open flat to positive on Tuesday, the settlement day for F&O monthly contracts on the NSE. Despite talk of an India-EU deal, continuous selling by foreign portfolio investors and weaker-than-expected results by India Inc in the December quarter are weighing on investor sentiment, analysts said.
However, analysts expect limited downside from here, given the sharp slide, and any positive news could trigger a violent pullback rally.
Sachin Neema, fund manager at Garud Investment Managers, said: “Although markets are in an oversold position due to geopolitical tensions, global trade uncertainty and FII outflows from domestic equities, the sentiment could still remain weak with the Union Budget announcement around the corner.
“Also, investors could exercise caution ahead of the monthly F&O expiry during the week, as any pick up in global tensions could fuel extended selling and result in further fund outflows. While the ongoing earnings season has been a mixed bag so far, all eyes will be on the FM’s Budget speech on February 1 and its proposals for sectors, given the delay in US-India trade agreement and the falling rupee which is widening the trade deficit gap,” he said.
Gift Nifty positive
Gift Nifty at 25,287 indicates a gain of about 80 points at open for Nifty.
Madhavi Arora of Emkay Global Research, in a note, said: The impending India–EU FTA comes at a crucial juncture of global trade fragmentation, rising protectionism, US–India trade frictions, and heightened global uncertainty. The deal could act as an effective counter-cyclical buffer by improving India’s export participation in global value chains, expanding market access, and supporting supply-chain diversification. With the EU accounting for ~17% of India’s goods exports, we estimate that a possible bilateral alignment could lift India’s exports to the EU by ~ USD50 billion by 2031, led by medium-tech manufacturing. Improved import efficiency and higher FDIs would further support productivity gains and tech transfers, while greater regulatory certainty could aid IT services exports, where the EU already accounts for ~1/3rd of demand. We see Pharma, Textiles, and Chemicals as the key beneficiaries to play this theme, aligned with India’s broader structural recalibration of exports.
Liquidity booster
According to analysts, the Reserve Bank of India’s liquidity booster measures will act as a stabilising factor.
To further anchor liquidity, the RBI will purchase government securities worth ₹1,00,000 crore through open market operations. The bond purchases will occur in 2 tranches of ₹50,000 crore each on February 5 and February 12, 2026. This addition targets the long-term funding requirements of the banking sector.
FPI behaviour
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, FPIs not only continued their selling spree in the week ended January 23, but also increased the intensity of their selling. Total FPI selling in the equity market this month stood at Rs 33,598 crores (NSDL)
“Market participants believe that the delay in the US-India trade agreement will widen India’s trade and current account deficits further impacting the rupee. Sustained FII selling is in anticipation of this rupee depreciation. In brief, if FII confidence in Indian market is to resume two conditions should be fulfilled:One, corporate earnings have to improve; two, the US-India trade deal should happen. While the former is likely in Q4 FY26, there is no clarity at all on the timeline of the latter. This is the biggest uncertainty weighing on the market now,” he added.
According to Ponmudi R, CEO of Enrich Money, Indian equities are likely to see a mild technical pullback from recent lows with a positive close in US markets and a mildly positive tone across Asian markets providing early support.
Recent remarks from the U.S. administration, indicating a possible rollback of tariff measures linked to India’s reduced Russian oil imports, have provided a near-term sentiment boost. However, clarity on timelines and execution remains key, keeping optimism measured. On the flip side, persistent FII outflows and continued weakness in the Indian rupee against the U.S. dollar are likely to cap upside momentum, even as steady DII participation continues to absorb selling pressure at lower levels.
Published on January 27, 2026
