Indian equity markets are poised for another volatile session as global sentiment remains fragile amid ongoing geopolitical tensions and renewed US tariff threats. Market participants are bracing for a weak opening following Tuesday's sharp decline, though Gift Nifty suggests some near-term stability for domestic indices.

Global Market Pressures Impact Sentiment

Asian markets continue to trade under pressure as Japan's bond market experiences a significant sell-off, creating ripple effects across multiple asset classes. The broad global risk-off environment is expected to weigh on Indian equities, with foreign investor selling adding to the downward pressure. Precious metals gold and silver have bucked the trend, continuing to gain momentum amid the uncertain environment.

Ponmudi R, CEO of Enrich Money, noted that Indian equities are likely to open weak due to the combination of global uncertainty and follow-through selling pressure from the previous session's decline. The rupee remains vulnerable in this environment, keeping import-cost risks elevated and adding another layer of concern for market participants.

Mixed Q3 Earnings Disappoint Markets

The third-quarter earnings season has failed to provide the much-needed boost to market sentiment, with results across several heavyweight sectors proving disappointing. Key sectors including IT, Auto, Realty, and select Financials have delivered mixed to weak performance, falling short of investor expectations.

Analysts indicate that the results have been either in line with modest expectations or underwhelming, contributing to the cautious market outlook. This earnings backdrop has shifted investor focus toward the upcoming Union Budget as a potential catalyst for market direction.

Budget Expectations and Market Outlook

With the Union Budget scheduled for February 1, market participants are looking for policy measures that could revive sentiment. Experts anticipate selective buying opportunities, particularly in the small and mid-cap segments, as investors position ahead of potential announcements.

Key areas of expectation include:

• Capex push in railways sector
• Increased defence spending
• Consumption support measures

However, analysts caution that while these expectations remain constructive, they may not be sufficient to counter the prevailing global uncertainty in the near term.

Technical Analysis and Market Dynamics

Market volatility has intensified, with India VIX rising 7.63% to 12.73, reflecting heightened caution and risk aversion among participants. This elevated volatility index underscores the uncertain market environment and increased hedging activity.

Aakash Shah, Technical Research Analyst at Choice Broking, highlighted that derivatives data shows heavy call writing at the 25,500 strike and significant put writing at the 25,100 strike. This establishes the 25,100-25,500 band as a crucial near-term pivot zone for the markets.

Strategic Approach for Investors

Given the current market conditions, analysts recommend a cautious yet constructive approach. Traders are advised to remain selective and focus on key support levels for potential opportunities. Fresh directional positions should only be considered after decisive breakouts above established resistance levels.

The combination of global uncertainty, mixed earnings, and upcoming budget expectations creates a complex environment where short-term technical bounces may emerge if domestic institutional investor inflows can absorb the supply or if foreign institutional investor selling moderates. However, investor confidence in the sustainability of such moves remains low in the current challenging environment.

Indian stock markets faced intense selling pressure on Tuesday, with benchmark indices posting significant declines amid a broader global market selloff. The downturn was attributed to renewed trade war concerns, mixed corporate earnings results, and sustained foreign institutional selling that dampened investor confidence across sectors.

Market Performance Overview

The domestic equity markets witnessed sharp declines, reflecting the global risk-off sentiment that dominated trading sessions worldwide.

According to Ajit Mishra, SVP Research at Religare Broking Ltd, market sentiment remained subdued due to mixed corporate earnings and renewed concerns surrounding geopolitical tensions and global trade developments. Persistent foreign institutional selling, along with a weaker currency environment, further weighed on investor confidence and kept risk appetite restrained throughout the session.

Global Market Impact

US markets experienced their worst single-day performance since October 10, with all major indices posting substantial declines following President Donald Trump's tariff threats against European countries over the Greenland issue.

Major technology stocks bore the brunt of the selloff, with Nvidia declining 4.38%, Apple falling 3.46%, Amazon dropping 3.40%, Tesla plunging 4.17%, and Microsoft declining 1.16%.

Asian Markets and Gift Nifty Signals

Asian markets continued the downward trajectory on Wednesday, reflecting concerns over the global trade environment. Japan's Nikkei 225 declined 1.28%, while the Topix fell 1.09%. South Korea's Kospi dropped 1.09% and the Kosdaq fell 2.20%. Hong Kong's Hang Seng index futures indicated a lower opening.

However, Gift Nifty was trading around the 25,297 level, showing a premium of nearly 38 points from the Nifty futures' previous close, indicating a potentially mild positive start for Indian stock market indices.

Commodity and Currency Movements

Safe-haven assets gained momentum as investors sought refuge from equity market volatility. Gold prices rose 0.80% to reach a new record high of $4,806.00 per ounce, while silver climbed 0.40% to $95.01, approaching its record high of $95.87.

The dollar languished near three-week lows against the euro and Swiss franc following the White House threats over Greenland. The dollar index remained flat at 98.54 after falling 0.53% overnight, while the yen held steady at 158.19 per dollar.

Crude oil prices traded lower, with Brent crude falling 1.31% to $64.07 per barrel and US West Texas Intermediate crude futures declining 1.21% to $59.65.

Trade Relations Development

Amid the market turbulence, India and the European Union are reportedly close to finalizing a Free Trade Agreement, described by some as "the mother of all deals." European Commission President Ursula von der Leyen indicated that India and the EU are set to announce the conclusion of negotiations on January 27, 2026, at the India-EU summit.