Indian equity markets extended their losing streak to a fifth consecutive session on Friday, as investor caution intensified ahead of a pending US court ruling on the legality of Trump's proposed 500% tariffs on India. The sustained selling pressure, combined with persistent foreign fund outflows, weighed heavily on market sentiment.

Market Performance Overview

The benchmark indices closed significantly lower, reflecting the prevailing risk-off sentiment among investors.

The Nifty 50 has corrected approximately 2.62% from its all-time high of 26,373 recorded on January 5, 2026, over the last four trading sessions. According to Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, this highlights a shift from consolidation to a short-term corrective phase.

Broader Market Weakness

Market breadth remained decisively negative, underscoring the weak undertone across segments. The broader indices faced significant pressure with midcap stocks declining 0.7% while the smallcap index dragged close to 2%. Ajit Mishra from Religare Broking noted that the small-cap index has corrected 3.8% over the last two sessions.

Sectoral Performance and Stock Movements

On the sectoral front, oil & gas and IT indices posted modest gains, while realty and auto emerged as the top two losers. During the week, 15 of the major sectors declined, reflecting broad-based weakness.

Among Nifty 50 constituents, Asian Paints, ONGC, HCL Tech, and Bharat Electronics led the gainers, while Adani Enterprises, NTPC, Adani Ports, ICICI Bank, and Jio Financial Services emerged as major laggards. Heavyweight stocks HDFC Bank and Trent shed 6-10% during the week.

Foreign and Domestic Investment Flows

Investment flows continued to show divergent trends between foreign and domestic institutional investors.

Market Outlook and Expert Commentary

Vinod Nair, Head of Research at Geojit Investments, indicated that the market remains in a consolidation phase due to weak global cues and rising global bond yields. He noted that domestic GDP growth is expected to remain strong, and Q3 results should indicate a recovery led by midcaps, potentially stabilizing investor sentiment.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, suggested there is a high probability the US court verdict will go against Trump's tariff proposals. Kaynat Chainwala from Kotak Securities emphasized that if the court rules against the tariffs, concerns over an intensifying trade war could ease, potentially providing relief to market sentiment.

Indian equity markets suffered their most devastating start to a calendar year in recent memory, with sustained selling pressure wiping out over ₹9 lakh crore in investor wealth across just five trading sessions. The Sensex plummeted more than 2,000 points during the week, including a sharp 600-point decline on Friday, as global uncertainty and trade tensions created what market participants described as a comprehensive "risk-off" phase across Dalal Street.

Trump Tariff Rhetoric Triggers Market Rout

The primary catalyst behind the sustained selloff was renewed tariff-related rhetoric from US President Trump, who signaled potential increases in tariffs on Indian goods over India's continued purchases of Russian crude oil. The situation deteriorated further when the US hinted at imposing punitive 500% tariffs on countries importing Russian oil, rekindling fears of major disruptions to global trade flows.

The India-US trade relationship has come under intense scrutiny as negotiations on a bilateral trade agreement remain unresolved despite six rounds of talks since March. US Commerce Secretary Howard Lutnick recently claimed that the deal stalled due to a lack of direct engagement between Prime Minister Narendra Modi and Trump. The Trump administration has already imposed tariffs of up to 50% on Indian goods, among the highest levied on any country.

Sustained Foreign Investor Exodus

Foreign institutional investor outflows significantly amplified the market's weakness throughout the week. The selling pressure remained intense, with foreign investors offloading Indian equities worth ₹3,367 crore on Thursday alone, extending their selling streak to a fourth consecutive session after a brief pause earlier in the month.

Persistent FII selling has particularly impacted large-cap stocks where foreign ownership remains high. Defensive sectors offered limited support as investors largely remained on the sidelines, awaiting clarity on global trade policy and geopolitical developments.

Technical Analysis Reveals Bearish Patterns

From a technical perspective, the damage proved equally severe across key market indicators. Ponmudi R, CEO of Enrich Money, noted that the Nifty lost nearly 2.40% over the week, forming lower highs and lower lows in a classic bearish pattern. The index slipped below key short-term moving averages, with momentum indicators pointing to continued weakness.

While mild buying emerged near 25,623 levels, the lack of strong volumes prevented any meaningful recovery. Immediate support lies around 25,600, with a stronger base near 25,500, while 26,000 now acts as a major resistance zone.

Vinod Nair, Head of Research at Geojit Investments, observed that markets remain stuck in a consolidation phase due to weak global cues, rising bond yields and persistent FII outflows. He added that uncertainty around US-India tariff negotiations and geopolitical tensions has intensified domestic risk-off sentiment.

Nilesh Jain, Head of Technical and Derivatives Research at Centrum Broking, pointed out that the Nifty slipped below the 25,700 mark and faced stiff resistance near its 50-day moving average. Momentum indicators have generated sell signals on both daily and weekly charts, while India VIX jumped 16% during the week, signaling rising fear in the market.

Critical US Supreme Court Verdict Awaited

Investors are closely monitoring a crucial development as the US Supreme Court is set to deliver a landmark ruling on the legality of sweeping tariffs imposed by Trump under the International Emergency Economic Powers Act. According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, there is a high probability of the verdict going against Trump, but the market reaction will depend on whether the tariffs are partially struck down or declared entirely illegal.

Expert Recommendations for Investors

Market experts are advising caution rather than panic in the current environment. While near-term sentiment remains fragile, several analysts believe the current fall is corrective rather than a complete trend reversal. Long-term investors are being advised to avoid aggressive buying, focus on high-quality stocks, and stagger investments gradually. Short-term traders are recommended to stay light, respect stop-loss levels and brace for continued volatility until global clarity emerges.