Indo-US Trade Deal, Budget 2026 Booster Dose - The Catalysts Indian Markets Are Waiting For: Ajay Bagga

US stocks fell last week as the AI favourites saw a sell off , led by Oracle which fell over 12% and Broadcom which fell despite good results.

The weakness is continuing in Asian markets this morning. Chinese retail sales, industrial production and investment numbers all came in below par, adding to the sour mood in the markets.

Looking like Scrooge will not let global markets enjoy a Santa Claus rally into the New Year.

Central Bank Actions to Watch This Week

Monetary policy decisions from major central banks are in focus this week. The European Central Bank (ECB) which is expected to stay in "pause" mode, Bank of England which is expected to "cut" and most importantly, Meanwhile, the Bank of Japan is projected to raise rates by 25 basis points, coinciding with a government stimulus package exceeding $110 billion.

With the Japanese government announcing a stimulus, this monetary hawkishness will lead to impact on momentum and flows both, as the 'carry trade', so vital to global risk assets, could reverse. Markets will be in wait and watch mode on the back of this.

Indian markets are "Waiting for Godot"

Indian markets are "Waiting for Godot" in a wait mode since February 2025 for a "favourable" US trade deal. PM Modi spoke to President Trump last week and a US trade delegation had another round of discussions with their Indian counterparts.

Skepticism and Low Volatility Signal Diminished Expectations

The good news is that markets are very skeptical and volatility index (VIX) is at a very low level, a pointer to diminished expectations and lack of catalysts. FPIs have sold massive amounts this year and continue to watch the falling Rupee with trepidation .

Potential for Sharp Catch-Up Trade

Any positive catalyst like an Indo US trade deal and a booster dose from the Union Budget 2026 could lead to a sharp "catch up" trade in Indian markets. We remain constructive on better times ahead. And are "Waiting for Godot" with undiminished optimism in the Indian story.

Also Read: Ajay Bagga Sees Volatility Ahead as Global Cues, Fed Decision and Big Tech Earnings Steer Indian Markets