January 2026 was a month of stark contrasts for the Indian economy; a “push-and-pull” dynamic where historic diplomatic wins battled it out against market turbulence and technological anxiety. While the indices felt the heat, the long-term structural foundation received a significant boost.

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Markets Last Month 🗓️

1. Market Sentiment: The Volatility Bug

Well, if a single word has to be used to summarise the Indian markets for the previous month, it should be ‘Volatility’. Since the start of the month, the headline as well as the broader indices exhibited choppiness, and this continued or rather, was exacerbated by the end of the month. Nifty 50 was down by 3%, while midcaps and smallcaps were down anywhere between 3.5% to 5.5%. One thing which did not change was the FII selling. FIIs were net sellers in the cash market to the tune of ₹41,435 crores. From a sectoral standpoint, Nifty Realty and Nifty FMCG were the biggest casualties

2. Trade Victories: A Global Reset

India and the European Union concluded a landmark Free Trade Agreement (FTA) on January 27, 2026, ending nearly two decades of negotiations and creating one of the world’s most significant trade pacts. Bilateral trade in goods and services already exceeds €180–€200 billion, and the FTA is projected to further unlock this potential by eliminating or reducing tariffs on over 96% of EU exports to India and liberalising over 99% of Indian exports by value to the EU. The deal grants Indian sellers duty-free or preferential access across labour-intensive sectors (textiles, leather, jewellery, marine products) and high-value engineering goods, while EU exporters gain reduced duties on machinery, automotive components, chemicals, and premium products like wine and spirits. India also secured improved access in services (IT/ITeS, professional, financial) and commitments on customs facilitation, regulatory cooperation, and intellectual property protection. Beyond tariffs, this FTA is strategic — designed to deepen economic integration between a 1.45 bn-person market and the world’s largest trading bloc over the next decade.

India and the United States reached a major trade breakthrough, ending tariff tensions and signalling a reset in economic ties. Under the deal, reciprocal tariffs on Indian goods entering the US have been cut to ~18% from punitive levels that had effectively reached ~50%, restoring competitiveness for Indian exporters after prolonged headwinds. This tariff rollback applies to roughly 60% of India’s export lines, with sectors such as garments, leather, footwear, carpets, seafood, and gems & jewellery set to benefit most as duty burdens fall below competitors like Bangladesh and Vietnam. The Indian rupee and equity markets responded positively, with strong single-day gains as export uncertainty eased. The pact also touches on broader strategic trade areas and is expected to improve predictability for pricing and orders, allowing exporters to plan rather than bleed market share. While the final text is still being worked out, the deal marks a significant de-escalation in US–India trade friction and could help sentiments.

3. The Budget: Capex over Populism

The Union Budget reinforced policy continuity rather than surprise, which markets welcomed. Capital expenditure remained the centrepiece, with allocations of approximately ₹ 12.2 lakh crores—nearly 4.4% of GDP—supporting infrastructure, defence, and manufacturing. The fiscal deficit glide path was maintained, with the government reiterating its commitment to maintain the same below 4.4% levels over the medium term. Importantly, there were no major changes to personal or corporate tax structures, preserving predictability for both consumers and investors. Bond markets reacted positively to disciplined borrowing estimates, while equities reacted negatively on account of the STT hikes in the derivatives segment. The message was clear: growth will be driven by execution, not populism. For investors, the Budget strengthened confidence that macro stability will not be sacrificed, even as the government continues to push a capex-led growth model. We released a detailed report on the budget. You can go through it here.

4. Indian IT: The “Anthropic” Wake-up Call

Indian IT stocks corrected sharply after Anthropic unveiled its advanced AI agent, reigniting fears of faster automation in software services. Nifty IT index fell ~6% on Feb 4, as investors reassessed long-term revenue and margin assumptions. The concern isn’t immediate disruption, but the risk that AI-led productivity tools could compress billing rates and slow deal ramp-ups. Nearly 40–45% of Indian IT revenues still come from application maintenance and low-complexity work—areas most vulnerable to AI-led efficiency gains. The sell-off marked a narrative shift: AI is no longer optional or distant. For Indian IT firms, the next phase of growth will depend on how quickly they monetise AI—not just adopt it.

5. Precious Metals: The Bubble Pops

Gold and silver markets saw unusually wide price swings in recent times. After one-way rallies in both gold & silver, the euphoria suddenly got arrested, and prices crashed by over 30% on silver and 20% on gold. Domestically, MCX gold futures surged above ₹1.8 lakh per 10 g and silver futures briefly eclipsed ₹4 lakh per kg, both record levels amid strong physical and ETF buying coupled with weaker dollar conditions. India’s Economic Survey notes both metals touched lifetime peaks in 2025 as safe-haven demand surged. However, short-term volatility remains elevated: profit-booking and trading pressure have seen sharp intra-week reversals, particularly in silver, underlining the high-beta nature of white metals for investors. 

Windmill Wisdom 🦉

Hedging Global Chaos: The Case for Multi-Asset Investing
An analysis of why geopolitical tensions and currency depreciation have sent gold and silver prices soaring, highlighting the need for diversified portfolios to cushion against market volatility. Read Insights→

The India-EU Trade Deal: A Global Shopping Pact
An overview of the landmark agreement that eliminates tariffs on over 99% of Indian exports, opening massive doors for sectors like textiles, jewellery, and engineering in the European market. Spot the Winners →

India’s Financial Backbone: Growth vs. Regulatory Risk
A deep dive into the capital market infrastructure, analysing how brokers and exchanges offer high growth through derivatives, while RTAs provide a more stable, regulatory-protected investment path. Understand it→

Rebalance Completed 🧮

Our quant-based and AI-based model smallcases were reviewed and updated.

• Defence Picks – AI Model
• Growth Multicap – Quant
• Quality Bluechip – Quant
• Quality Smallcap – Quant

Head over to the smallcase app, check out the smallcase of your choice, > Go to Stocks & Weights tab and scroll down to download the Portfolio Report to view the rationale behind the rebalance.

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