India-US Trade Deal Delay: Why It's a Sentiment Overhang, Not a Macro Shock

The Indian stock market has been struggling to hold onto its gains, and one major reason is the uncertainty surrounding the India-US trade deal. However, according to experts, a delayed deal is more of a sentiment overhang than an immediate macro shock for India.

Market Trends and Challenges

The current market structure is characterized by high headline resilience but weak internal breadth. Index levels are being supported by a narrow set of large stocks, while the broader market is seeing persistent profit booking. This divergence between real growth optimism and modest nominal growth is capping earnings visibility.

Investment Strategy

This is not a market for aggressive, all-at-once buying, but it is also not a market that warrants staying completely on the sidelines. Volatility is creating dispersion, which is healthy for long-term investors. The right approach is staggered allocation with a clear bias towards balance sheet strength, earnings visibility, and reasonable valuations.

• Avoid waiting for perfect stability, as it usually means missing the best entry points.
• Focus on building positions gradually, keeping cash for further volatility, and avoiding leveraged or purely narrative-driven trades.
• Markets tend to discount uncertainty before it shows up clearly in data, so selective buying during periods of discomfort often works better than waiting for clarity.

Impact of a Delayed India-US Trade Deal

A delayed India-US trade deal is more of a sentiment overhang than an immediate macro shock. While certain export-oriented sectors may see slower order momentum or deferred investment decisions, India’s growth engine today is far more domestically driven than in the past.

Key Themes for Next Year

Next year is likely to be about earnings normalization rather than multiple expansion. Themes such as domestic manufacturing, capex-linked plays, financialization of savings, and premium consumption should remain relevant. AI will continue to dominate market chatter, but the narrative will evolve from promise to monetization.

Investment Strategy for the Indian IT Sector

The Indian IT sector is moving from a period of earnings downgrades towards gradual stabilization, but a sharp cyclical rebound is unlikely in the near term. Deal pipelines are improving selectively, though discretionary spending remains cautious. Opportunities exist, but stock selection is critical.

Expectations for Q3 Earnings Season

Q3 earnings are unlikely to deliver a broad-based surprise on the upside. Growth is expected to be steady but not spectacular, with margins under pressure in sectors facing input cost volatility or pricing competition. Management commentary will be key, with markets reacting more to guidance on demand visibility, margin trajectory, and capital allocation.

Key Market Expectations from Budget 2026

Markets are looking for continuity rather than big-bang surprises from Budget 2026. The primary expectations are sustained focus on capital expenditure, fiscal discipline, and measures that support manufacturing and job creation. A credible fiscal glide path remains critical for bond markets and foreign investor confidence.

Remember, this is a perspective, not a prediction. Do your own research and consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.