Indian equity markets faced headwinds as benchmark indices ended lower despite selective strength in certain sectors. The session highlighted mixed corporate developments and regulatory actions that shaped investor sentiment across multiple industries.

Market Performance Shows Mixed Signals

Indian equity benchmarks closed Tuesday's session in negative territory, weighed down by losses in major stocks including Reliance Industries, Trent, and select consumption names. However, pockets of strength emerged in financials, metals, and pharmaceuticals sectors. The Nifty managed to defend the crucial 26,150 level during the weekly expiry session, despite pressure from heavyweight stocks such as Reliance Industries and HDFC Bank.

Services Sector Momentum Weakens

India's services sector growth showed signs of deceleration in December, with the HSBC India Services Purchasing Managers' Index slipping to concerning levels. The PMI data revealed a notable slowdown in economic momentum.

The December reading came in below the flash estimate of 59.1, indicating that fresh demand softened and hiring activity stalled. While the PMI remained above the 50-mark that separates expansion from contraction, the decline suggests moderating growth in the services sector.

Corporate Developments and Regulatory Actions

Reliance Industries strongly denied reports suggesting Russian oil cargoes were headed to its Jamnagar refinery, calling such claims "blatantly untrue" and stating they have tarnished the company's image. The company clarified it is not expecting any Russian cargo in January.

Shares of Indian Energy Exchange surged as much as 13% after the lawyer representing the Central Electricity Regulatory Commission indicated readiness to take instructions from the Electricity Appellate Tribunal to withdraw the July 23, 2025 order. This development provided significant relief to investors, as the original order had caused IEX shares to fall nearly 30% in a single trading session.

RBI Strengthens Financial Institution Oversight

The Reserve Bank of India issued Amendment Directions on Lending to Related Parties, targeting enhanced governance and transparency across the financial sector. The new regulations apply to multiple institution types and include provisions for non-compliant transactions under specific conditions.

These directions aim to tighten governance around transactions involving related parties, strengthening the overall regulatory framework for financial institutions.

Steel Sector Under Regulatory Scrutiny

The Competition Commission of India sought responses from steel companies following its investigation arm's findings of prima facie cartelisation concerns. Sources indicated that the probe, headed by CCI's director general, concluded that around 35 steel companies have prima facie indulged in cartelisation. However, the Competition Commission has not accepted or rejected these findings at this stage, with no ruling passed yet on the allegations.

Indian equities extended their decline for the third consecutive session on Wednesday, with the BSE Sensex falling over 1,144 points in three days and the NSE Nifty 50 dropping nearly 1% over the same period. What began as a narrow pullback has transformed into a sharper retreat, leaving both benchmarks firmly in negative territory for the week.

Market Performance Overview

The selling pressure intensified on Wednesday, with both indices trading significantly lower during afternoon sessions. The decline marks a substantial correction from recent highs, driven by multiple headwinds affecting investor sentiment.

Key Factors Behind Market Decline

Heavyweight Stock Selling Pressure

Losses in index heavyweights continued to exert disproportionate pressure on benchmark indices. Major constituents faced significant selling, with HDFC Bank shares declining 1.70% on Wednesday while Reliance Industries slipped 0.40%. Trent witnessed a sharp 1.40% fall after plunging 8.60% in the previous session amid retail segment competition concerns.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that recent market movements lack clear direction, with actions in mega stocks influencing the overall market disproportionately. He emphasized that sharp declines in Reliance and HDFC Bank are more technical in nature rather than fundamental concerns.

Venezuela Crisis and Geopolitical Tensions

Global risk appetite suffered a significant blow due to political upheaval in Venezuela, creating uncertainty around petroleum reserves. The crisis escalated following a controversial U.S. military operation that led to the capture of President Nicolas Maduro and his wife by U.S. special forces, with Maduro currently held in a New York jail.

Dr. Vijayakumar highlighted the potential for continued high volatility, noting that Trump-related actions and a possible Supreme Court verdict on tariffs could create substantial market fluctuations.

Weak Global Cues and Asian Market Selloff

Indian markets tracked declines across Asian markets, where investors grappled with ramifications of the Venezuela crisis and global energy supply uncertainties. Japanese equities particularly weighed on regional benchmarks after China announced a ban on dual-use item exports to Japan following remarks by Japanese Prime Minister Sanae Takaichi on Taiwan.

Technical Analysis and Market Outlook

Technical indicators suggest the recent decline represents a corrective or consolidation phase rather than a breakdown in the longer-term trend, though elevated volatility remains a near-term risk.

Jaykrishna Gandhi, Head of Business Development at Emkay Global, noted that the Nifty has completed a 1-1.5 year time correction, which historically precedes bullish trend resumption. He highlighted that post-2009 corrections have shifted from sharp price declines to time-wise consolidations, reflecting improved structural strength.

Anand James, Chief Market Strategist at Geojit Investments, pointed to mixed technical signals, with Friday's strong close near the upper Bollinger band suggesting upside momentum continuation, though VIX near record levels indicates potential volatility spikes.

Sectoral Performance and Investment Flows

Despite broad market weakness, certain sectors demonstrated resilience. The pharmaceutical sector showed particular strength, with Nifty Pharma confirming a breakout from an inverted head and shoulder pattern, indicating bullish continuation potential.

Institutional activity reflected mixed sentiment, with foreign portfolio investors remaining net sellers while domestic institutional investors provided support through continued buying, helping cushion the market decline during the correction phase.