 "Trump tariffs, economic recovery: Here are top stock market risks in FY26")
Stock Market Risks in FY26: Financial year 2024-25 (FY25) was a see-saw year for Indian stock markets, marred by domestic and global headwinds. From Lok Sabha elections, back home, to the US Presidential elections and China's multiple stimulus plans, investors saw their market returns swing during the last 12 months.
However, even as the turbulent year nears its end, the uncertainty is far over with analysts forecasting heightened choppiness in the new financial year 2025-26 (FY26), fueled by US President Donald Trump's impending reciprocal tariffs.
Back home, all eyes will be on the pace of economic recovery and the sustainability of renewed foreign inflows.
The concerns, Gaurav Dua, Senior Vice President and Head of Capital Market Strategy at Mirae Asset Sharekhan, said appear to be more global than local.
"On the domestic front, the economy could see an improvement with the anticipated rise in government capital expenditure and strengthening rural demand. However, globally, a fresh wave of uncertainty looms as the tariff war kicks in on April 2," he added.
To recap, the benchmark indices -- Nifty50 and Sensex -- are set to close FY25 with gains of 6.3 per cent and 6.1 per cent, respectively. The broader market indices -- Nifty MidCap and Nifty SmallCap -- meanwhile, are set to draw curtains on the year with up to 6.5 per cent gains.
Global funds pulled a record ₹1.54 trillion from Indian equities this financial year, while domestic institutional investors invested a record ₹6 trillion.
Against this, here are the key risks that stock market investors should watch out in in FY26:
Trump's tariff play: With the April 2 deadline approaching, Trump's reciprocal tariffs continue to threaten global stocks and currencies. Experts warn that these tariffs pose a significant risk for financial markets in FY26 and could weigh on investor sentiment.
"The full impact on global trade and economic growth is yet to be realised, as such policy changes typically take a few quarters to trickle down," noted Narendra Solanki, Head of Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers.
That said, media reports suggest that Trump's tariffs could be more focused and targeted than initially feared.
Delayed economic recovery: Analysts noted that while no major risk stands out on the domestic front, a quick economic recovery remains crucial. Most domestic concerns, such as sluggish growth and the gradual recovery following interest rate cuts, they believe, are already reflected in market valuations.
"Markets have been anticipating a pickup in growth during the first half of FY26, but if this recovery is pushed toward the latter half of the year, it could lead to short-term disappointment among investors," said Narendra Solanki of Anand Rathi.
Earnings woes: That apart, despite a downward revision in earnings growth expectations, analysts caution that market projections still remain above the reported trend.
"Fourth-quarter earnings are likely to be slower as credit growth remains weak, and the impact of government spending and the Reserve Bank of India's liquidity measures will likely be seen only from the next fiscal year," according to Ajit Mishra, SVP Research, Religare Broking.
Uncertainty around FII inflows: While Indian stock markets, last week, witnessed their first weekly net inflow of foreign funds in calendar year 2025, amid short covering, analysts point out that its sustainability remains a key monitorable.
"Global economic trends, US interest rate movements, and geopolitical uncertainties will continue to shape investor sentiment, making the long-term sustainability of FII flows dependent on both domestic resilience and external stability," Ajit Mishra of Religare Broking explained.
Global risk-offs: Beyond the tariff scare, the risk of a US recession, prolonged global monetary tightening, and unforeseen geopolitical uncertainties could impact capital inflows, analysts said. Additionally, improved economic prospects in China may divert investments, weighing on Indian stocks, they added.