Key Trends to Watch in January 2026: ECTA Becomes Effective, US Fed Rates, and Other Cues to Watch

January 2026 is shaping up to be a decisive month for financial markets, driven by global monetary cues, India’s pre-Budget signals, and shifting liquidity trends. Investors are closely tracking whether macro stability can hold amid rising valuation concerns.

ECTA Gets Implemented From January 1, 2026 

January 1, 2026, will mark the full implementation of the India–Australia Economic Cooperation and Trade Agreement (ECTA). With 100% duty-free access to Australia, sectors such as textiles, leather, gems and jewellery, and engineering goods could see incremental growth.

However, ongoing global trade tensions and tariff uncertainties remain a wildcard. 

US Federal Reserve Meeting is Scheduled for Jan 28, 2026

The U.S. Federal Reserve remains the single most important global liquidity driver. After cutting interest rates to a 3.50%–3.75% range in December 2025, markets are now focused on the January 28, 2026 FOMC meeting.

While expectations lean toward further easing, the Fed has clearly signalled a cautious, data-dependent path. Any signs of inflation staying above 3% could pause rate cuts, pressuring high-valuation growth stocks and tightening global risk appetite.

US Bond Yields and SIP Inflows Could Impact FII and DII Movement

The tug-of-war between foreign and domestic investors will continue into 2026. Foreign institutional investor (FII) flows remain closely linked to movements in U.S. 10-year Treasury yields. Any rise in yields could trigger renewed FII outflows from emerging markets like India.

At the same time, steady SIP inflows from domestic institutional investors (DIIs) are acting as a crucial buffer. The key question for January is whether domestic liquidity can continue to absorb foreign selling, as it successfully did through much of 2025.

Will There Be A Market Correction in January 2026? 

India’s rise to become the world’s fourth-largest economy has strengthened confidence in its long-term story. The focus now is on sustaining high growth alongside manageable inflation.

As the Q3 earnings season kicks off, investors will closely track revenue growth. Weak top-line performance, despite favourable macro conditions, could increase the risk of a market correction.

Read more: Zepto IPO: Rising Cash Burn Fuels Bubble Fears in India’s Costly Quick-Commerce Race.

Conclusion

January 2026 sits at the intersection of global monetary policy, domestic fiscal expectations, and earnings reality. How markets respond to the Fed’s signals, Budget cues, and institutional flows will set the tone for the months ahead. For investors, staying selective and focused on earnings quality may matter more than chasing momentum in a rapidly evolving macro landscape. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.