WPI inflation, FPI trends, trade deal: 5 key triggers for Indian equity markets this week

The Indian equity market is expected to remain volatile in the coming week as investors digest a heavy slate of macroeconomic data and policy cues, said market analysts. On Friday, the equity benchmarks closed in positive territory, with the Sensex rising 449.52 points to 85,267.66, while the Nifty50 settled 148.40 points higher at 26,046.95.

In the first half of December, the domestic bourses delivered flat returns, swinging between gains and losses despite rate cuts by the Reserve Bank of India and the U.S. Federal Reserve. Persistent uncertainty over the India–U.S. trade deal and a slump in the Indian rupee have raised concerns about foreign portfolio investor flows and domestic risk appetite.

“Markets are likely to trade with heightened sensitivity to macroeconomic data and policy signals, with volatility remaining elevated as investors reassess global growth prospects, inflation dynamics and interest-rate expectations—a shift that is also expected to have a significant impact on currency markets,” said Ponmudi R, CEO, Enrich Money, an online trading and wealth-tech firm.

Ajit Mishra- SVP, Research, Religare Broking, suggested investors to stay selective and maintain a balanced approach amid ongoing currency volatility and mixed global cues.

“Large-cap exposure remains preferable, particularly in sectors such as private banking, automobiles, metals, and pharmaceuticals. Export-oriented stocks may continue to benefit from a weaker rupee, though IT could remain range-bound given correction in the US IT-heavy index, Nasdaq Composite. Caution is advised in mid and small caps as valuations remain elevated and liquidity support has moderated,” he said.

Here are the five key factors that will set the tone for the Indian equity market this week:

U.S. macro data

The spotlight will be on the United States, where key macro releases—including consumer price inflation, retail sales and non-farm payrolls—are expected to provide deeper insight into the underlying strength of the economy and the inflation outlook, said the CEO of Enrich Money.

He believes these data points will be critical in shaping expectations around future policy moves, particularly after the Federal Reserve’s recent 25 bps rate cut. Markets remain divided on whether the Fed, which appears increasingly split internally, will be in a position to deliver another rate cut in 2026, as indicated by its latest dot plot projections.

WPI inflation, export-import data

On the domestic front, the Ministry of Commerce and Industry will announce wholesale price index (WPI) inflation for November on December 15. In October, WPI eased to -1.21%, primarily due to a decrease in prices of food articles, crude petroleum and natural gas, and some manufactured products. The WPI food index declined to -5.04% in October, driven by sharp drops in the prices of vegetables and pulses, while the fuel and power segment registered an annual deflation of -2.55%.

In addition, the commerce ministry will also release export-import data for November on December 15, which will be keenly tracked by investors. “The numbers are expected to offer early signals on how Indian exports are faring in the wake of the recently imposed 50% duty by the U.S. on certain Indian goods,” said Ponmudi.

USD–INR trend

Market participants will keep a close eye on the movement of the Indian rupee, which hit a series of record lows against the U.S. dollar in the past week. Ponmudi of Enrich Money said markets are increasingly unsettled by the sharp depreciation of the rupee. “The sustained currency weakness is emerging as a key headwind, intensifying pressure on foreign portfolio investor flows and limiting risk appetite,” he said.

FPI flows

Foreign institutional investors (FIIs) sold equities worth ₹15,959 crore through the exchanges in December so far, but the selling was completely eclipsed by domestic institutional investor (DII) buying of ₹39,965 crore during the same period.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, expects FII selling pressure to ease in the coming months as global investors reassess India’s medium-term growth and earnings potential.

Steady inflows from retail investors into mutual fund systematic investment plans (SIPs) have emerged as a key stabilising force for Indian equities, offsetting sustained FII selling in December, he said.

India–U.S. trade deal

In a development indicating forward movement in India–U.S. bilateral trade talks, a delegation of trade officials from the U.S. Trade Representative (USTR) visited New Delhi between December 9 and 11 and held “productive exchanges” on economic ties and a mutually beneficial trade deal, according to sources in the commerce ministry.

According to a PTI report, India and the United States have agreed to continue their constructive and forward-looking engagement following two days of discussions between an Indian delegation and a U.S. team led by Deputy U.S. Trade Representative Rick Switzer.

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