Indian equity markets are facing significant selling pressure as multiple negative triggers weigh on investor sentiment. Over the last few sessions, benchmark indices have declined sharply, and two major factors are driving this correction: disappointing Q1 FY26 earnings and ongoing uncertainty around the US-India trade deal.

Let’s break down the developments:

The primary reason behind the market correction is the weak set of Q1 results delivered by heavyweight companies, especially those that hold a significant weightage in the Nifty index. Major contributors such as Reliance Industries, HDFC Bank, and leading IT companies like TCS, Infosys, and HCLTech have all released their earnings—and most of them have failed to meet market expectations.

Among the IT pack, HCLTech reported a 10% drop in profits. The company also reduced its headcount, signaling muted business growth in the near term. As a result, the stock witnessed a fall of 5–6% post results. TCS, on the other hand, posted results that were broadly in line with expectations, but even then, the stock slipped by nearly 4%, indicating investor disappointment.

The weakness was not limited to IT. The banking sector also disappointed. HDFC Bank, one of the largest private sector banks, reported results that the market deemed underwhelming. Stocks like Bajaj Finance saw declines of up to 7–8% in intraday trading. A common issue emerging from these banking results was a jump in provisions and a rise in NPAs (non-performing assets). This has raised red flags about the overall asset quality, which is critical for sustained profitability in the financial sector.

Notably, both IT and banking together form the backbone of the Nifty 50 index, accounting for a substantial portion of the index’s weight. Weak results from these sectors have therefore had an outsized impact on broader market sentiment.

Another important factor behind the sell-off is global uncertainty, particularly surrounding the proposed US-India trade deal. Earlier, there was optimism that US President Donald Trump might finalize a trade agreement with India before the August deadline, especially after the US agreed to a 90-day pause on new tariffs. This had created some bullish sentiment in April and May.

However, as the days pass with no concrete update from either side, market participants are getting increasingly nervous. Unlike the deals the US recently signed with Japan and South Korea, the Indian trade pact is still pending. Speculation is rife in the media, with some reports suggesting tariffs could be as high as 15–20% if a deal isn't finalized soon. This lack of clarity has injected a fresh dose of volatility and caution among traders and long-term investors alike.

In conclusion, the Indian markets are navigating through a phase of heightened uncertainty. On one hand, the poor performance of key index-heavyweight companies is raising concerns about the health of corporate earnings. On the other, the delay and ambiguity over the US-India trade deal are keeping global cues negative. Until there's clarity on both these fronts—especially corporate earnings recovery and a firm stance on the trade front—markets are likely to remain under pressure.