Indian equity markets are poised for a cautious start to 2026, influenced by currency volatility, foreign institutional investor (FII) flows, and US-India trade discussions. Despite a narrow trading range, broader market segments like smallcap and midcap indices outperformed the Nifty50. Defence and metal stocks led gains, while PSU Bank, IT, and pharma stocks saw declines. Persistent FII selling, totaling over Rs 4,290 crore, dampened sentiment, though RBI liquidity interventions offered some rupee stability. US markets, meanwhile, reached record highs.