Indian Stock Market: Volatility Expected This Week Amid Global Economic Shifts

The Indian equity markets are anticipated to experience significant volatility in the upcoming week as a combination of domestic macroeconomic data and global geopolitical developments take center stage. Market analysts suggest that the direction of the indices will be heavily influenced by the monthly Futures and Options (F&O) expiry, scheduled for February 24, alongside critical economic indicators. Plus, the global sentiment remains sensitive to the trade policies of the United States and the ongoing tensions in the Middle East, which are expected to keep investors on edge. The movement of foreign institutional investors (FIIs) and fluctuations in international crude oil prices will remain pivotal factors for the domestic market trajectory.

Domestic Macroeconomic Indicators and F&O Expiry

According to Ajit Mishra, SVP (Research) at Religare Broking, the monthly F&O expiry is likely to induce heightened volatility in the trading sessions. Investors are also preparing for the release of crucial domestic data points, including the Gross Domestic Product (GDP) figures and infrastructure output growth. The status of India's foreign exchange reserves and the government's fiscal position following the budget announcements will also be under scrutiny, while according to officials, these data sets will provide a clearer picture of the country's economic resilience amidst global headwinds. The market's ability to sustain current levels will depend largely on whether these domestic indicators meet or exceed institutional expectations.

Impact of US Tariff Decisions and Legal Rulings

Global market sentiment has been recently impacted by US President Donald Trump's executive orders regarding trade tariffs. Initially, a 10% tariff was imposed on several countries, including India, for a period of 150 days, which was subsequently increased to 15%. However, a significant development occurred when the US Supreme Court ruled that such broad tariffs imposed under the International Emergency Economic Powers Act (IEEPA) of 1977 were unauthorized, stating the President had exceeded his jurisdiction. This legal setback for the Trump administration's economic agenda has introduced a new layer of uncertainty in global trade dynamics. Analysts believe that the subsequent steps taken by the US administration will be closely monitored by global markets for their potential impact on international trade relations.

Global Geopolitical Tensions and Crude Oil Dynamics

Vinod Nair, Head of Research at Geojit Financial Services, noted that global factors such as the US-Iran relationship and the resulting impact on crude oil prices will be critical triggers, while as India remains a major importer of crude oil, any spike in energy prices due to geopolitical instability in the Middle East could affect the domestic inflation outlook and fiscal balance. Also, global monetary signals from major central banks and the performance of international equity markets will dictate the risk appetite of investors. The upcoming GDP report for India is expected to be a defining factor for market trends and corporate earnings expectations in the near term.

Review of Previous Week's Market Performance

During the preceding week, the Indian benchmark indices managed to end with modest gains despite global uncertainties. 39%. Market sentiment fluctuated between caution and optimism throughout the week. Strong buying interest was observed in banking, financial services, power, and select FMCG stocks, which helped offset the pressure from global factors. Conversely, the IT sector faced challenges due to disruptions related to Artificial Intelligence (AI) and concerns over margin pressures. The resilience of large-cap stocks provided the necessary support to keep the indices in positive territory by the end of the week.

Sectoral Trends and Institutional Activity

Market analysts observe that the near-term outlook for the stock market remains range-bound, with liquidity flows being a primary driver. The participation of India in global economic initiatives and the stability of large-cap companies have contributed to a cautiously positive stance. However, the pressure on the IT sector and the potential for further trade-related news from the US suggest that sectoral rotation may continue. According to experts, the market will likely react to specific news triggers rather than following a broad-based trend. The focus will remain on how institutional investors navigate the current environment of high volatility and shifting global trade policies.