Stock Markets Expected to Rebound After Holiday Break

On Friday, 23 January 2026, the Sensex and the Nifty 50 ended sharply lower than the previous day. This happened amid continued foreign institutional investor selling and geopolitical uncertainties. At the close on Friday, the Sensex fell 769.67 points, or 0.94%, to 81,537.70. The Nifty dipped 241.25 points, or 0.95%, to settle at 25,048.65.

However, industry watchers feel Indian equity benchmarks can regain lost ground when trading resumes after a holiday break. Note that markets remained closed on Monday, 26 January 2026, for Republic Day. Possible relief from US tariffs, fresh expectations around the India–European Union trade talks, and a large liquidity injection announced by the Reserve Bank of India (RBI) can boost markets this week.

Hopes of US Tariff Relief

The immediate trigger for improved sentiment is the possibility of a rollback in US tariffs on India. US Treasury Secretary Scott Bessent said there could be a path to removing the additional 25% tariffs imposed on Indian goods.

Bessent linked the potential review to India’s reduced purchases of Russian oil. He said India’s intake of Russian crude had fallen sharply after the Donald Trump administration imposed the tariffs. Any easing of the tariff stance could remove a near-term overhang.

It also comes at a time when investors are closely tracking trade policies under the Trump administration, given their impact on global flows and emerging markets.

India–EU Trade Talks Back in Focus

Adding to the positive cues, European leaders arrived in India over the weekend for the 16th India–EU Summit. The discussions are expected to focus on pushing forward a long-pending Free Trade Agreement (FTA) between India and the European Union.

Officials on both sides have indicated that the talks aim to deepen trade ties and reduce barriers to trade in goods, services, and investment. Market participants are watching for any signals of timelines or broad areas of agreement. Progress on the India–EU deal is being seen as important at this stage of the cycle.

Liquidity Support From the RBI

On the domestic policy front, the RBI announced a series of liquidity measures on Friday, expected to ease conditions in the banking system.

The central bank said it would inject over ₹2 lakh crores through multiple avenues. This includes a 90-day variable rate repo operation of ₹25,000 crores, scheduled for 30 January 2026. The RBI will also conduct a USD/INR buy-sell swap auction worth $10 billion, or around ₹91,000 crores, with a tenure of 3 years on 4 February 2026.

Liquidity from RBI comes amid signs of tightness in the system and ahead of heavy government borrowing linked to the upcoming Union Budget. Bond yields had risen in recent sessions, reflecting concerns about supply and cash balances.

What These Signals Mean for Investors?

For investors, the coming sessions may bring relief after the recent heavy corrections. However, volatility may not go away anytime soon. Signals of tariff easing and progress on trade talks could support export-linked stocks and improve broader sentiment. At the same time, RBI liquidity measures may help banks and rate-sensitive sectors in the short term.

Sources:

Livemint

Moneycontrol