India's benchmark equity indices have witnessed substantial declines in January, with both the BSE Sensex and NSE Nifty falling over 4% amid a confluence of domestic and global headwinds. The market downturn reflects persistent foreign fund outflows, currency weakness, and broader global uncertainties that have kept investors cautious.

Market Performance Overview

The equity markets have faced significant pressure this month, with key indices recording notable declines across the board.

Last week alone, the BSE benchmark tanked 2,032.65 points (2.43%), while the Nifty declined 645.7 points (2.51%), highlighting the intensity of the recent sell-off.

Historical January Trends

Market data reveals a pattern of January declines in recent years. In January 2025, the BSE benchmark had declined 638.44 points (0.81%). Similar downward trends were observed in January 2024, 2023, 2022, 2021, and 2020, suggesting a recurring seasonal pattern.

Santosh Meena, Head of Research at Swastika Investmart Ltd, noted that historically, similar pre-budget trends in January have witnessed sharp falls followed by recovery post-Republic Day leading up to the Budget, with market participants hoping for a similar reversal this time.

Key Contributing Factors

Several interconnected factors have contributed to the current market weakness:

• Foreign Portfolio Investor Selling: Aggressive selling by foreign portfolio investors due to global risk-off environment
• Currency Weakness: The rupee hit a historic low of 92 against the US dollar on January 23, slumping over 2% this month
• Geopolitical Uncertainties: Fresh tariff concerns and geopolitical risks creating market volatility
• Global Market Conditions: Elevated crude oil prices and rising global bond yields

Market Outlook and Analysis

Ponmudi R, CEO of Enrich Money, explained that geopolitical uncertainties and fresh tariff concerns have exerted a cascading impact on domestic equities. The global risk-off environment has prompted aggressive selling by foreign portfolio investors, adding pressure on the rupee and reinforcing a defensive stance among investors.

Elevated crude oil prices in international markets, alongside rising global bond yields, have further compounded risk aversion, keeping investors cautious as markets navigate an increasingly uncertain global macro and geopolitical landscape.

According to Axis Securities, with global uncertainty, domestic growth resilience, and fiscal discipline all in play, the Union Budget 2026-27 is expected to strike a balance between growth support and macro stability, which could influence market sentiment in the coming weeks.

Investment strategist Dr. V K Vijayakumar has advised investors against attempting to time the market in today's volatile environment, emphasizing that spending time in the market proves more effective than trying to predict market movements. This guidance becomes particularly relevant as Trump's economic and foreign policies create significant geoeconomic and geopolitical disruptions with far-reaching global consequences.

India's Growth Performance Amid Global Uncertainty

India has demonstrated remarkable economic resilience in the post-COVID period, achieving impressive growth rates despite various headwinds. The country's GDP performance showcases its position as a leading global economy during challenging times.

This growth trajectory makes India the fastest-growing large economy globally during this period, achieved while maintaining financial stability despite challenges including Trump tariffs.

Corporate Earnings Challenge

While India's GDP growth remains robust, corporate earnings present a contrasting picture. The sharp decline in earnings growth has become a significant concern for market performance.

The underperformance of the Indian market correlates directly with this sharp decline in corporate earnings growth, highlighting the critical relationship between earnings and market trends.

Nominal GDP Growth Impact

Low inflation rates have affected nominal GDP growth, creating additional pressure on corporate earnings. The nominal GDP growth for FY26 is estimated at 8.1%, significantly below the Budget estimates of 10.1%. This shortfall has contributed to the subdued earnings growth in FY26, though expectations suggest improvement in FY27 as inflation returns to normal levels.

Market Volatility and Trump Policy Effects

Trump's policy announcements have created significant market volatility, particularly through tariff-related measures. The 'reciprocal tariffs' announced in April 2025 initially triggered negative global market reactions, though bilateral trade agreements subsequently helped avert a potential trade war. Similarly, the 'Greenland tariffs' targeting eight European countries created temporary market concerns before tensions subsided.

Dr. Vijayakumar notes that while tariff-related noise generates short-term volatility, long-term market trends depend on fundamental factors like economic growth and corporate earnings rather than geopolitical events.

Investment Strategy Recommendations

The investment expert recommends maintaining a long-term perspective despite ongoing geopolitical uncertainties. Key strategic points include:

• Stay invested: Continue existing investment positions rather than attempting market timing
• Continue investing: Maintain regular investment discipline regardless of short-term volatility
• Focus on fundamentals: Prioritize economic growth and corporate earnings over geopolitical noise
• Expect volatility: Prepare for heightened market fluctuations due to ongoing global uncertainties

Dr. Vijayakumar emphasizes that stock markets historically demonstrate an ability to overcome various challenges, suggesting they will navigate current Trumpian disruptions as well. He concludes that while personalities and events are temporary, economies and markets endure over the long term.