Indian Markets Poised to Open Flat as Trade Optimism Meets Cautious Global Backdrop

Domestic Indian shares are expected to trade on a flat note at Wednesday’s open, despite positive momentum from the previous trading session. While optimism surrounding the newly announced India-U.S. trade agreement and renewed foreign investor interest should provide some support, weak global signals are likely to cap gains. The underlying sentiment remains cautiously balanced as investors weigh domestic tailwinds against international headwinds.

Union Minister Piyush Goyal confirmed in a press statement that critical sectors including agriculture and dairy have received protective provisions within the India-U.S. trade arrangement. This development helped fuel significant gains on Tuesday, with both Sensex and Nifty benchmark indices climbing approximately 2.5 percent following President Donald Trump’s unveiling of the trade framework. The tariff reduction across most Indian export categories has addressed long-standing concerns that have burdened local markets in recent months.

India-U.S. Trade Deal Breakthrough Lifts Domestic Sentiment

The tariff relief holds particular significance for labor-intensive industries such as gems, jewelry, textiles and apparel, according to assessments by Moody’s Ratings. The rating agency highlighted that tariff reductions on these sectors are credit positive, potentially spurring growth and investment in manufacturing-dependent regions. Beyond tariffs, Moody’s noted that while India is unlikely to immediately halt Russian crude purchases, any gradual diversification toward alternative suppliers could create supply pressures globally and feed through to inflation dynamics, given India’s status as a major oil consumer.

FII Inflows Signal Restored Confidence in Indian Equities

Foreign institutional investors (FIIs) made a decisive return to Dalal Street on Tuesday with the largest single-day purchase since late October 2025, reversing a prolonged outflow pattern. FII investments reached Rs. 5,426 crore in the cash market segment, while domestic institutional investors (DIIs) added Rs. 345 crore. This capital influx reflects renewed confidence in Indian equities. The Indian rupee also showed strength, appreciating by 122 paise to reach 90.27 against the U.S. dollar, reinforcing the positive sentiment in the currency markets.

Global Headwinds and Geopolitical Risks Keep Upside Capped

Offsetting these domestic positives, U.S. equity markets retreated from recent highs overnight as investors rotated away from technology stocks into economically sensitive shares. European bourses finished flat after erasing early gains, while Asian markets exhibited mixed trading. Technology firms, including Advanced Micro Devices, have flagged cautious outlooks, with AMD forecasting a slight contraction in first-quarter revenue. These signals ahead of earnings announcements from major companies like Google and Amazon may weigh on regional sentiment.

Geopolitical tensions between the United States and Iran have escalated, lifting commodity prices. Gold surged more than 2 percent to reach $5,048 per ounce, building on its strongest day since 2008, driven by renewed geopolitical concerns. Oil prices extended gains after climbing 2 percent on Tuesday following a U.S. military response to an Iranian drone incident near the Abraham Lincoln aircraft carrier in the Arabian Sea. President Trump has signed a $1.2 trillion budget to resolve a partial government shutdown, funding most agencies through the fiscal year-end in September, though the Department of Homeland Security will require additional appropriations by the end of the following week.

The Federal Reserve’s mixed messaging—with Governor Stephen Miran advocating for aggressive rate cuts and Richmond Federal Reserve President Tom Barkin signaling more tightening distance remains—adds to the uncertain backdrop. With Indian markets navigating between trade-driven optimism and global caution, investors should expect a flat opening that could see either direction challenged depending on follow-through flows and global risk sentiment later in the session.