US Fed policy, Union Budget to Delhi Assembly Election: Top 5 factors that may dictate Indian stock market next month | Stock Market News

The Indian stock market commenced 2025 on a negative trajectory, experiencing a sharp sell-off across all sectors. Both benchmark indices, Sensex and Nifty 50, have declined by over 3% in January to date.

The downturn in the equity market has been primarily driven by a trifecta of factors: subdued corporate earnings, stretched valuations, and persistent foreign portfolio investment (FPI) outflows. The FPIs have offloaded Indian equities worth over ₹67,000 crore so far this month.

As we move into February, several key developments are expected to influence the performance of the Indian stock market. Here are the top five factors that could shape market trends in the coming month.

US Fed Policy

US Federal Reserve will announce its first monetary policy decision of 2025 on January 29. The two-day meeting of the Federal Open Market Committee (FOMC) is scheduled from January 28 to 29, with the interest rate decision being announced on January 29. This will also be the first Fed policy after US President Donald Trump took charge of the White House.

The US Fed is expected to keep interest rates on hold but the larger story unfolding will be how the central bank confronts early moves by President Donald Trump that are likely to shape the economy this year, including demands the Fed continue lowering borrowing costs, Reuters reported.

Union Budget 2025

Finance Minister Nirmala Sitharaman is set to present the Union Budget for 2025-2026 on February 1, Saturday. The Budget 2025 is expected to focus on continued infrastructure investment and foundational demand stimulation measures to drive economic recovery. Analysts also expect the targeted fiscal deficit to be around 4.5% of GDP, reflecting the government’s commitment to maintaining macroeconomic stability amidst global uncertainties.

For the Indian stock market, the key things to watch are the extent of fiscal consolidation, the delta in spends on physical and social infrastructure and sector level incentives/spends.

RBI Policy

The Reserve Bank of India (RBI) is set to announce its monetary policy in the first week of February. The next meeting of the RBI Monetary Policy Committee (MPC) is scheduled for February 5 to 7. This will be the first RBI policy under the new Governor Sanjay Malhotra.

On Monday, the RBI announced to infuse the much-needed liquidity of ₹1.5 lakh crore into the system over a period of time through a combination of forex and money market measures, setting the stage for a potential rate cut next week. 

RBI said it will purchase government securities worth ₹60,000 crore through open market operations (OMOs) in three tranches of ₹20,000 crore each. RBI will also conduct a 56-day variable rate repo auction worth ₹50,000 crore on 7 February and dollar/rupee sell swap auction of $5 billion for a tenor of six months on 31 January.

DeepSeek AI Concerns

The emergence of a low-cost Chinese artificial intelligence model DeepSeek AI has prompted a steep sell-off in US chipmakers and technology stocks globally. Japanese technology shares also plunged amid a global market rout sparked by the concerns over DeepSeek, with investors questioning the sky-high valuation and dominance of AI bellwethers.

Delhi Assembly Election 2025

The elections to the 70-member Delhi assembly are scheduled for February 5. The results will be announced on February 8.