February, 2026

January Jinx

Mohit Dugar, CFA

The markets made the January jinx true again. What started as a strong month, with markets up almost 1% in the first couple of days of trading quickly gave way for one of the worst routs the markets have seen. Historically, the Indian markets have given negative returns for the past eight years out of ten in the month of January, giving a failure rate of 80%. Nifty's January performance reveals a troubling pattern of consistent underperformance. The sharpest decline occurred in 2016 with a nearly 5% fall, while the only significant positive returns came in 2017 and 2018 with gains of 4.6% and 4.7% respectively. One of the main reasons for this underperformance has been the constant selling by the FIIs, with outflows at around $2.5B and ₹ depreciation against $ at 5% adding fuel to fire.

Another bouncer by President Trump was the unexpected attack on Venezuela, where the US was able to capture the Venezuelan President Nicolás Maduro and the first lady Cilia Flores. The US justifies the attack as a crackdown on an authoritarian regime aiding and abetting drugs and terrorism. However, Venezuela has the world’s largest proven crude oil reserves, with an estimated 303 billion barrels lying in the ground – making up around a fifth of all proven crude reserves in the world. After the attack, US has instructed its oil companies to set up base and start operations. US wants to control the oil in the region.

Only the first month and geopolitical tensions are at a peak. US also instigated and supported the anti-regime protests in Iran, with constant threats of striking Iran – fuelling risk of a full scale war. In the violent protests, around 3,000 people have lost their lives and Trump after initially giving support went silent. The protesters have accused Trump of backing out. Iran has warned of blocking the Strait of Hormuz – a critical chokepoint from where around 20-25% of the world’s oil passes by. If this path is blocked, the oil prices can go soaring.

Crude oil has historically been an important macro variable for India, however, structural changes in the economy have significantly reduced vulnerability to oil price shocks. Oil imports as a percentage of GDP have fallen from 8.5% to 4.8% over the years. The share of petroleum products in total imports has fallen, with greater diversification into other products, lowering macroeconomic sensitivity to oil volatility. Share of investments in renewables has increased from ~23% in 2013-14 to over 40% in 2024-25. Reducing sensitivity to crude oil prices is positive for India’s macroeconomic stability and external balance.

After so much turmoil, some bright shoots are visible in the economy. The best news so far being the signing of India-EU FTA, dubbed as the “Mother of all Trade Deals”, after an eighteen-year long hiatus. The deal will remove or reduce duties on over 90% of EU goods exported to India, creating a trade zone covering two billion people and marking the largest deal ever reached by either side.

India will grant EU companies tariff reductions not extended to any other trading partner, covering major sectors including alcohol, food products, chemicals, machinery, pharmaceuticals, aerospace, and automotive:

• Automobiles: Tariffs gradually falling from 110% to 10%, under a quota of 250,000 vehicles a year, with car parts fully exempt within five to ten years.
• Machinery, chemicals, pharmaceuticals: Duties of up to 44%, 22%, and 11% largely eliminated.
• Aerospace: Tariffs on aircraft and spacecraft to be eliminated for almost all products.
• Agri-food: Wine tariffs cut from 150% to 75% at entry, eventually dropping to 20–30%; beer tariffs cut to 50%; spirits tariffs cut to 40%; olive oil, margarine, vegetable oils, fruit juices, and processed food tariffs eliminated. Sensitive products such as beef, chicken, rice, and sugar remain protected.
• Processed goods: Bread, confectionery tariffs up to 50% eliminated.
• Sensitive items, such as beef, chicken, rice, and sugar, are excluded.
• Services access and intellectual property strengthened:The FTA grants EU companies privileged access to India’s services market, including financial services and maritime transport, with commitments surpassing those in prior agreements.
• Intellectual Property (IP): Provides high-level protection and covers copyrights, trademarks, designs, trade secrets, and plant variety rights — aligning Indian and EU laws and facilitating trade and investment for IP-dependent businesses.

Precious metals continued their dream run with rally extending to around 30% in Gold and 70% in Silver at peak valuations. However, the rally was dampened by a sharp fall on the last day of the month – Gold dropping by approximately 30% and silver dropping by around 37% in a single day – on the back of $ strength and Trump announcing his pick for Fed chair – Kevin Warsh, who might not reduce policy rates as aggressively as though so earlier – negative news for precious metals.

On the macro front, retail inflation inched to a three-month high of 1.3% in December – important for nominal GDP growth, IIP growth at 7.8% - two year high. India became the fourth largest economy surpassing Japan, with projections to even surpass Japan by the year 2028. IMF has also raised projections for India’s GDP growth from 6.6% to 7.3%.

Now, all eyes remain on the budget and the trade deal between India and USA. The FTA between India and EU has sure put some pressure on the US to speed things up. What are the details of the deals and how soon it is ratified will tell the direction of the markets in the near future. Does this deal hold the key to a renewed rally in the Indian markets, only time will tell.

Till then, stay invested and be patient!

www.pinnaclefinvest.com

mohit@pinnaclefinvest.com

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