Market focuses on trade deals and earnings amid global volatility

July 2025 witnessed significant market turbulence due to the recent 25% tariff announcement by US President Donald Trump. The implications of this move are still evolving as the global trade dynamics continue to shift. Investors find themselves in a critical phase of monitoring the evolving situation around the bilateral trade agreement between India and the US.

The Nifty 50 experienced a 2.8% decline, mid-cap stocks fell 2.9%, and small-caps slipped 4.3% in July. Despite outperforming global peers, India remains exposed to trade uncertainties, policy changes, and volatile capital flows. Domestic institutional investors (DIIs) played a crucial role by injecting USD 4.4 billion into the market during the month.

Experts in the industry highlighted the factors influencing market performance in July 2025. Rising trade tensions and the ongoing earnings season played a significant role in shaping market dynamics. While the US finalized trade deals with several countries, negotiations with India remain unresolved, particularly concerning agricultural access, causing investor unease.

The delay in reaching a trade agreement between India and the US has intensified market uncertainty. The recent tariff imposition and penalties for India’s engagement with Russia have added to market jitters. However, certain sectors like textiles, marine products, and gems & jewelry are expected to bear the brunt while IT and pharmaceutical sectors are likely to remain insulated.

Market sentiments fluctuated in early July amid expectations of broader tariff announcements by President Trump. Fortunately, major economies avoided severe shocks, and stable crude prices offered some respite. Earnings reports reflected a mixed picture with revenue growth trailing street estimates. IT companies reported weaker revenue growth, while financials faced margin pressures in specific segments.

By the end of July, around 30% of NSE 500 companies had reported their earnings. Large-cap firms exhibited double-digit profit growth, while mid and small-cap companies saw mid to high single-digit gains. Earnings season results were characterized as steady, although not exceptional. PGIM noted a 3.1% drop in consensus EPS for Q1FY26, citing cautious IT outlook and a moderate consumption rebound.

As investors look towards August, key triggers include progress on the India-US trade deal, earnings flow, and the Reserve Bank of India’s stance. The market remains watchful for any developments that may provide clarity on the trade agreement’s future. Additionally, ongoing earnings announcements will continue to influence market sentiments, along with the RBI’s monetary policy decisions.