- Indian shares ended a five-session slide on Jan. 12, 2026, with the Sensex and Nifty up about 0.4% after the U.S. envoy said trade talks with India would resume on Jan. 13.
- The bounce eased worries over U.S. tariff escalation, with existing levies up to 50% and proposals that could lift tariffs as high as 500% for countries trading with Russia.
- Sentiment remains fragile as foreign investors continue to sell heavily, worsening recent declines and leaving markets sensitive to policy and legal outcomes on tariffs.
- Stocks were mixed under inflation and oil-price pressures, with domestic-facing names firmer and export-exposed sectors more vulnerable.
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After a sharp decline for much of the past week—marked by the worst weekly loss in over three months—Indian stock markets showed signs of stabilization on January 12, 2026, largely driven by diplomatic signals from the U.S. side. The newly appointed U.S. Ambassador to India, Sergio Gor, said that trade issues would be discussed in a call on January 13, helping to allay fears that the bilateral trade deal was in disarray; this sparked a rebound in the Sensex (+0.36 %) and Nifty (+0.42 %) despite earlier intraday losses as deep as 0.8 %.
Despite this short-term recovery, several tail risks loom large. First, the policy environment remains highly uncertain. Trump administration tariffs currently stand at up to 50 % on certain Indian goods due to oil import policies, and there is active legislative push for 500 % tariffs via bills targeting those trading with Russia. These escalate risks to exports, particularly from sectors like textiles, metals, and possibly poultry and small manufacturers.
Second, financial flows continue draining: foreign institutional investors (FIIs) have sold heavily, compounding downward pressure. Domestic investors may partially offset, but net capital outflows weaken both the rupee and valuations. Market sentiment has also been hurt by global cues, geopolitical risks, rising crude, and waiting for expectations around U.S. Supreme Court rulings over the legality of tariffs—another source of uncertainty.
Third, earnings and macro fundamentals are mixed. Some companies posted solid performance (for example, Avenue Supermarts), but others, like Tejas Networks, reported losses. Inflation and oil price pressures weigh on margin expectations and corporate outlook. Meanwhile, government policy (trade, external deficits, energy sourcing) and regulatory rulings will play out over coming weeks. What currently appears to be a ‘relief rally’ could be fragile unless underpinned by clear policy signals.
Strategically, investors should differentiate exposure by sector: financials appear to lead recoveries; export-intensive industries are vulnerable; sectors insulated from trade frictions (e.g. domestic consumption, services) may provide safer harbor. Monitoring upcoming policy events—trade talks, Supreme Court verdicts on tariffs, energy/weapons import regulations, and potentially retaliatory measures—will be key to navigating risk.
Supporting Notes
- The Nifty 50 rose 0.42 % to 25,790.25; the Sensex added 0.36 % to 83,878.17, recovering from earlier losses of up to 0.8 %.
- This followed a five-session losing streak and weekly losses of around 2.5 %—their worst week in more than three months.
- Sergio Gor, U.S. Ambassador, stated that India and the U.S. will discuss trade issues in a call on January 13.
- U.S. levies already at up to 50 % on Indian goods; proposed bills may allow tariffs up to 500 % for countries doing business with Russia.
- Foreign institutional investors sold ₹37.69 billion ($417.63 million) on Friday; around $1.3 billion sold so far in January.
- Industrial performance mixed: for example, Avenue Supermarts rose ∼3 % on strong earnings; Tejas Networks fell nearly 9.5 % after reporting a net loss.