Stock Market Cues This Week: India-US Trade Talks, US GDP Data, FPI Flows, Rupee Among Other Factors In Focus

Benchmark indices ended the previous week with mild losses amid a weak rupee, mixed global and domestic macroeconomic data, and the lack of certainty over the potential India-US trade deal. 

The Sensex and the Nifty 50 started the week on a negative note. However, the indices staged a sharp recovery on the week's last session. By the close of the week, the Sensex lost nearly 0.40 per cent and the Nifty 50 dipped around 0.31 per cent.

The week saw Bank of Japan (BoJ) raising its key interest rate by 25 basis points (bps), post which the Asian country's benchmark 10-year government bond yields surpassed the 2 per cent mark for the first time in 26 years. The rising Japanese bond yields aggravated concerns over the ongoing foreign fund outflows. The week also saw many macroeconomic data releases by the US, including unemployment data, which raised recession concerns and increased expectations of a more accommodative US Federal Reserve, going forward. Several other US macroeconomic data sets such as non-farm payrolls, manufacturing PMI, retail sales, retail inflation also shaped global investor sentiment.

The Reserve Bank of India (RBI) intervened to lend support to the depreciating rupee while the European Central Bank (ECB) kept interest rates unchanged for a fourth straight meeting, leaving its key deposit rate at 2 per cent, as widely expected. The Bank of England (BoE) reduced its policy rate for the fourth time this year, by 25 bps to 3.75 per cent, in line with market expectations.

The week also saw the end of Parliament’s Winter Session on December 19, during which legislators cleared a bill allowing private sector entry into the nuclear industry and permitting 100 per cent foreign ownership in insurance companies. On the regulatory front, market watchdog, the Securities and Exchange Board of India (Sebi) held a board meeting, after which it announced several reforms related to mutual funds expense ratio, stockbroker regulations among others, while Union Minister of Finance Nirmala Sitharaman introduced the Securities Markets Code Bill 2025 to consolidate securities market regulations under one single code.

Stock Market Cues To Watch This Week

The coming holiday-shortened week, from December 22-26 is likely to be driven by India’s trade talks with the US and the European Union, US economy’s growth, foreign fund flows and the rupee’s situation.  

It is worth noting that the exchanges will remain closed for trading on December 25 on the occasion of Christmas.

India-US Trade Deal

The India-US trade deal will be in focus this week as negotiations continue at an active pace. India is pushing for a fair and balanced agreement, trying to maintain its firm stance on sensitive areas, such as agriculture, dairy and fisheries. US Trade Representative Jamieson Greer last week acknowledged the difficulties in accessing India’s tightly regulated farm sector, even as India and the US maintain momentum towards a deal.

Domestically too, policymakers have reiterated confidence that the trade deal could be concluded by the end of the financial year. The momentum has also been supported by a recent phone conversation between Prime Minister Narendra Modi and US President Donald Trump, alongside high-level trade discussions in New Delhi. Any signals on progress or timelines could act as a sentiment trigger for markets.

India-EU FTA

Talks on FTA between India and the European Union (EU) is likely to be in focus this week after indications that negotiations are in their final stages with no major sticking points. Recent comments by the Dutch foreign minister David Van Weel during his three-day India visit have raised expectations of the deal being concluded soon. Any further clarity on timelines could influence investor sentiment, especially for export-linked sectors.

US GDP Data

The US Bureau of Economic Analysis (BEA) is set to release the gross domestic product (GDP) growth rate for the quarter ended September 30, 2025 of the world's largest economy on December 23. Any surprise in the growth numbers could trigger volatility in bond yields and the dollar, and in turn shape risk appetite across emerging markets, including India, in a holiday-thinned trading week.

FPI Flows

The last two sessions of the previous week saw foreign portfolio investors (FPIs) buying into domestic equities after being on a selling mode throughout December. According to the National Securities Depository (NSDL), FPIs bought equities worth Rs 1,607.62 crore on December 18 and Rs 337.53 crore on December 19. So far in the month, FPIs have offloaded shares worth Rs 14,185 crore. Market participants are likely to keep a track of FPI flows this week as well.

Rupee’s Revival

The rupee saw a strong recovery on the last day of the week, breaching below the 90 level against the dollar. Over the last three days, the rupee strengthened by 1.50 per cent to close at 89.57 on December 19.

According to Jateen Trivedi, vice president, research analyst - commodity and currency, LKP Securities, rupee's near-term direction will depend on the RBI's monetary policy committee (MPC) meeting minutes, dollar movement, and foreign fund flows. The RBI released its MPC meeting minutes earlier on December 20.