Seventeen stocks in the Nifty 500 index experienced severe declines last week, with losses ranging between 10% and 18%, as heightened geopolitical tensions and warnings of higher tariffs by US President Trump weighed heavily on investor sentiment. The broader market turmoil saw the Nifty 50 post its worst weekly performance in over three months, shedding 645 points or 2.45%.

Investor confidence in the Indian market took a significant hit amid fears of fresh US tariffs on Indian imports, escalating geopolitical tensions, and renewed foreign portfolio investor (FPI) selling. The selling pressure caused Indian equities to underperform their Asian peers in early January, despite the Nifty 50 scaling a fresh record high of 26,273 at the start of the year.

Top Laggards Face Double-Digit Declines

Transformers & Rectifiers emerged as the week's biggest loser, with shares plunging 18.5% to ₹274.30 apiece. The sharp selloff followed the release of the company's December quarter performance, which significantly dented investor sentiment.

Elecon Engineering faced heavy selling pressure during Friday's session, with the stock sliding 16% after its December quarter results. This contributed to a cumulative 15.5% decline for the week, ending at ₹423.60 per share.

Profit Booking Hits High-Flying Stocks

Premier Energies extended its weekly losing streak to four consecutive weeks, falling another 15.2% to ₹717.45 per share. The stock has now declined nearly 48% from its all-time high of ₹1,388, reflecting significant profit booking by investors.

After rising for three consecutive weeks, Ather Energy also witnessed substantial profit booking, with shares ending the week down 14.6%. Similarly, Jupiter Wagons saw renewed selling after a brief pause, dragging the stock lower by 13.2% to ₹293 per share.

Broader Market Impact

The Nifty 500 index mirrored the broader market weakness, posting a decline of 2.62% for the week. Other notable decliners included:

Force Motors shares crashed 12% to ₹18,710 per share, ending a four-week rally. Despite the sharp weekly decline, the stock remains significantly higher over longer timeframes, up 185% over the past year, 400% in two years, and 1,270% over the past five years.

Market Outlook and Expert Recommendations

Mr. Ajit Mishra, SVP – Research at Religare Broking, emphasized the need for caution in the current volatile environment. He noted that while bargain hunting could lead to intermittent rebounds after the sharp correction, sustained upside is likely to remain capped until greater clarity emerges on earnings, global trade developments, and FII flows.

Mishra recommended that investors focus on capital preservation and maintain higher exposure to quality large-cap stocks while avoiding aggressive positions in high-beta or leveraged names. He also suggested that selectively positioning in domestically driven sectors with strong balance sheets may offer relative stability, while export- and commodity-linked stocks could remain vulnerable to further global shocks.

The market volatility has been exacerbated by FPI selling, which has reached ₹11,800 crores in January so far, adding to the downward pressure on Indian equities.

The Indian equity markets concluded the week on a decidedly negative note, with the Nifty experiencing a decisive breakdown from its established 500-point trading range of 26,200-25,700. The benchmark index suffered a significant decline of 645.25 points, representing a 2.45% weekly loss, making it the only major global equity index to end in the red.

Weekly Performance Analysis

Throughout the trading week, the Nifty demonstrated a clear downward bias, oscillating within a substantial range of 750 points. The index's performance metrics highlight the extent of the market pressure:

The surge in India VIX by 16.51% to 10.93 reflects the heightened caution among market participants, driven by rising uncertainty around US trade tariffs and a deferred Supreme Court decision now expected on January 14.

Technical Structure and Indicators

The current technical framework suggests a potential pause in the prevailing uptrend, with the index closing below the lower edge of its established trading range. The breach below the 20-week moving average at 25,579 indicates incremental weakness in the market structure.

Key technical indicators are painting a cautious picture:

• RSI Analysis: The weekly RSI stands at 53.16, marking a fresh 14-period low while remaining neutral without any divergence against price
• MACD Signal: Shows a bearish crossover with the MACD line now below its signal line, accompanied by a widening negative histogram
• Momentum: The flattening RSI near the midline suggests waning upward momentum

Support and Resistance Levels

For the upcoming trading week, market participants should monitor these critical levels:

A failure to defend the crucial 25,300 level could attract incremental weakness and deepen the corrective move. Conversely, a bounce back above the 25,850-25,900 zone would be essential for the market to regain strength.

Sectoral Rotation Analysis

Relative Rotation Graphs analysis against the CNX500 Index reveals distinct sectoral positioning. The leading quadrant includes several key sectors expected to outperform:

Leading Quadrant (Outperformers):

• Nifty Services Sector and Pharma (newly rolled in)
• Infrastructure, Banknifty, PSU Bank
• IT, Midcap 100, and Financial Services

Weakening and Lagging Quadrants:

• Metal and Auto indices are in the weakening quadrant but showing improved relative momentum
• FMCG, Energy, and Realty indices occupy the lagging quadrant
• PSE and Media indices also lag but demonstrate strong momentum improvement

Market Outlook and Strategy

The technical setup indicates that while the broader uptrend remains intact, the index faces short-term pressure below its 20-week average. The combination of domestic consolidation and global risk events keeps markets vulnerable to further downside pressure.

Given the current market dynamics, a measured and stock-specific approach is advisable. The week ahead should be navigated with heightened caution, focusing on protecting gains and trailing stop losses rather than aggressive index positioning until clarity emerges through either resistance reclamation or external event resolution.