Analyzing the Impact of Foreign Fund Inflows and the India-US Trade Pact on Indian Stock Markets

In a significant development for the Indian stock markets, the BSE Sensex and NSE Nifty indices showed positive momentum in early trading sessions. This surge can be attributed to fresh foreign fund inflows and the recent India-US trade pact, which has bolstered investor confidence. In this analysis, we delve into the specifics of these market movements, examining their implications and potential future trends.

Market Performance Overview

On February 4, 2026, the Sensex advanced by 68.49 points, reaching 83,816.96, while the Nifty surged by 51.90 points to 25,779.45. This upward trajectory is indicative of a positive market sentiment driven by external economic factors.

Foreign Fund Inflows

Foreign Institutional Investors (FIIs) have been pivotal in driving the Indian stock markets. The recent inflows are a testament to the growing confidence in India's economic prospects. In January 2026 alone, FIIs invested approximately $2.5 billion, marking a significant increase from the previous month.

These inflows are crucial for maintaining liquidity in the markets and supporting the valuation of Indian equities. The sectors that have benefited the most include technology, pharmaceuticals, and consumer goods, which have seen substantial foreign investment.

India-US Trade Pact

The India-US trade pact is another critical factor contributing to the positive market sentiment. This agreement is expected to enhance bilateral trade, reduce tariffs, and open up new avenues for investment. Key sectors likely to benefit include technology, agriculture, and manufacturing.

The trade pact is anticipated to increase India's export potential, particularly in the technology and pharmaceutical sectors, which are poised for growth due to increased access to the US market.

Sectoral Impact

Analyzing the sectoral impact, technology stocks have shown a robust performance, driven by the dual factors of foreign investments and increased export opportunities. The pharmaceutical sector is also expected to gain from reduced trade barriers, enhancing its competitive edge globally.

• Technology: With increased foreign investments and export opportunities, the sector is expected to maintain a growth trajectory.
• Pharmaceuticals: The reduction in trade barriers is likely to boost exports, particularly to the US market.
• Consumer Goods: Benefiting from increased foreign investments, this sector is poised for steady growth.

Market Outlook

The current market conditions suggest a cautiously optimistic outlook. The combination of foreign fund inflows and the India-US trade pact is likely to sustain the positive momentum in the short to medium term. However, investors should remain vigilant of global economic conditions and potential geopolitical risks that could impact market stability.

Market may go up in the near term, driven by sustained foreign investments and enhanced trade relations with the US.