Q1FY26 earnings, US tariff risks, FPI pullout: What lies ahead for Indian stock markets in H2 2025?

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After a turbulent start to 2025 driven by tariff shocks, geopolitical risks, and global monetary shifts, the Indian equity market is heading into a crucial earnings season. The April-June quarter (Q1FY26) results, alongside developments in US-India trade negotiations, will likely set the tone for the rest of the calendar year.

All eyes on Q1 earnings

With earnings season underway, companies like HCLTech, Tech Mahindra, Axis Bank, ICICI Bank, Wipro, JSW Steel, L&T Finance, and HDFC Bank are expected to post results this week. Analysts expect steady revenue growth and improved profitability, though headwinds persist in global demand and discretionary spending.

Mayank Mundhra, VP at Abans Financial Services, says: “Q1 earnings will be key to assessing corporate resilience. This market is favouring smart stock-picking over sector-wide bets.”

US-India tariff talks

Trade tensions have resurfaced with the US extending the deadline for reciprocal tariff adjustments to August 1, 2025. Indian officials returned from Washington earlier this month after a week-long dialogue to finalise a mini-interim trade agreement.

While the US is considering tariff relaxations for textiles and footwear, there are lingering concerns over a proposed 200% tariff on Indian pharma exports, a sector where the US accounts for 40 per cent of India’s overall exports.

Manish Jain of Mirae Asset notes: “The impact of tariffs is not fully visible in Q1 earnings yet. If a flat 10% tariff is imposed on Indian exports, we estimate an additional $4.5 billion duty burden-roughly 6 per cent of CY24 exports to the US.”

FPIs turn net sellers again in July

Foreign Portfolio Investors (FPIs), who were net buyers for three straight months (April-June), turned net sellers in July, pulling out Rs 555 crore between July 1-11, according to NSDL data.

So far in 2025, FPI flows remain net negative at Rs 1.00 lakh crore, largely due to heavy selling in January and February. Experts attribute the renewed selling to elevated valuations in Indian equities and a shift toward cheaper emerging markets.

VK Vijayakumar, Chief Strategist at Geojit, said: “With Indian markets recovering from March lows, FPIs are booking profits. Short-term shifts to more attractively priced markets are likely.”

Inflation data, RBI stance also in focus

India’s CPI and WPI inflation data, due on July 14, will offer cues for the RBI’s next policy action. A spike in food inflation or signs of core inflation firming could keep rate cut hopes at bay in the near term.

Ajit Mishra of Religare Broking echoed a similar view, noting the performance gap within sectors is widening. “Even in outperforming sectors, only select names are delivering. The focus should remain on high RoE, consistent earnings, and cash flow visibility.”