Will there be some respite from volatility anytime soon? What is the market’s expectation from a trade deal with the US? Will earnings downgrades continue? And finally, is there any glimmer of hope of a broader turnaround?
To gauge the market’s pulse, we surveyed 34 investment professionals—analysts, economists, research heads, and fund managers—between 25 and 30 July. Their verdict: Brace for more uncertainty, as a US-India trade deal might end up rattling the markets.
This is the fourth in a new Mint series of quarterly market surveys, the first of which was held ahead of Diwali in October 2024, the second in February after the Union Budget and the last one in April.
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Trade jitters
Most experts (77%) agreed that while geopolitical risks have certainly reduced over the June quarter, key developments like the US-India trade deal might still negatively surprise markets. Around 9%, including Prashanth Tapse, senior vice-president at Mehta Equities, strongly believe that the market is heading into increasingly choppy waters.
On a more concerning note, experts were unclear as to what extent the market has priced in such uncertainties – meaning chances of shocks remain high. The market’s knee-jerk sell-off on 31 July after higher-than-expected US tariffs and a new penalty exemplifies such concerns.
Narendra Solanki, head of fundamental research at Anand Rathi Shares and Stock Brokers’ investment services vertical, noted that the risk of higher duties against India relative to its Asian peers, after a US-India trade deal, will keep markets on the edge for now.
However, most experts (76%) were also optimistic that India would be able to strike a balanced trade deal with the US, with only 3% fearing a detrimental outcome.
“We expect the US-India trade deal to lead to a largely balanced outcome, with mutual gains across sectors,” Ajit Mishra, senior vice-president of research at Religare Broking said. “Given the strategic nature of the partnership, the deal is unlikely to be overly one-sided.”
But a latest Emkay Global Financial Services report suggests that India’s Russian energy and defence purchases could further muddle trade talks. So far, negotiations have stalled over India’s refusal to allow large-scale US agri and dairy imports to protect domestic jobs. However, the unfolding situation after the sixth round of India-US bilateral trade agreement talks, set for late August in India with US counterparts, will be crucial.
Irrespective of the deal outcome, though, rising hostility between the two nations is raising doubts over India’s status as a geopolitical safe haven, noted a recent CLSA report. “At a time when India remains one the most expensive markets in the world, despite facing incessant earning cuts, this may make it more difficult to attract FPI inflow,” the report said.
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FPI exodus
Experts in the survey noted that while India’s structural story remains intact, elevated US treasury yields, global uncertainty and high domestic valuations are keeping foreign portfolio investors (FPI) at bay. They turned net sellers again in July, with equity outflows worth over ₹17,741 crore till July 30.
Around 35% of respondents, including those from Axis Securities, Geojit Financial, Ventura, and Mira Money, think foreign capital will re-enter Indian markets by the third quarter of FY26, once global interest rate concerns ease and corporate earnings show broader recovery.
“While Q3 could mark an inflection point, it’s possible that the positives, especially earnings recovery and (an) emerging markets risk-on mood, may take a bit longer to fully play out, pushing broader re-entry into late FY26,” Saurabh Rungta, CIO at Avendus Wealth Management said.
But half of the lot also seemed more optimistic. They think FPIs will continue to buy Indian equities cautiously and selectively, primarily in sectors benefiting from specific policy initiatives or global trends.
Earnings divide
Experts were similarly split on earnings cut expectations this earnings season. While 47% felt earnings downgrades will slightly outpace upgrades, based on Q1 results reported so far, an equal number of respondents said downgrades have bottomed out at current levels as earnings will likely pick up from the second half of FY26.
“Nifty 50 companies are expected to grow earnings by only 4–7% in Q1 vs full-year (FY26) estimates of 10–12%,” Gaurav Garg, analyst at Lemonn Markets Desk said. “We expect corporate revenue growth to remain muted in FY26 as nominal GDP growth is expected to cool to a six-year low of 9%.”
At this juncture, almost 79% of experts are betting that despite signs of an earnings slowdown across India Inc. some sectors will stand out in Q1.
Siddhartha Khemka, head of research at Motilal Oswal Financial Services’ wealth management division, expects oil and gas, telecom, lending-oriented non-banking financial companies (NBFC), public sector banks, pharmaceuticals and healthcare sectors to anchor earnings growth in an overall muted June quarter.
There was also consensus around cement, select auto and auto-ancillaries, agriculture and chemicals sectors outperforming in the June quarter.
But these trends are unlikely to trigger a broader rebound anytime soon. In Q1, market performance broadly met expectations, a sentiment shared by 68% respondents. Looking ahead, around half of those surveyed anticipate a range-bound movement in the upcoming quarter, while the others express either caution or moderate bullishness.
IPO hope
Amid this lull in the secondary market, a fraction of experts (6%) bets that the recent momentum in the IPO space, especially from quality issues, might gradually lift overall market sentiment. However, the majority (76%) believes that while IPOs might offer some hope, a sustained revival will require more consistent FPI inflows and clear signs of earnings recovery in the broader economy.
“A vibrant IPO market is a positive sign of capital formation and business confidence for the issuing companies. However, its ability to genuinely revive broader investor interest and confidence in the secondary markets is likely to be limited and indirect in the near term,” Dhiraj Relli, MD and CEO of HDFC Securities said.
