Indian equity markets faced significant headwinds last week, recording their steepest decline since mid-September as multiple external factors converged to dampen investor sentiment. The broad-based sell-off reflected growing concerns over trade tensions and foreign capital outflows, setting a cautious tone for the week ahead.

Market Performance and Key Pressures

Both benchmark indices suffered substantial losses during the trading week, with investor sentiment impacted by elevated geopolitical tensions and fresh tariff warnings from US President Donald Trump on Indian imports. The market pressure was further amplified by continued foreign institutional investor selling.

Ponmudi R, CEO of Enrich Money, explained that the proposed US tariff measures, largely linked to countries continuing to purchase Russian oil, remain a key near-term overhang for Indian markets. He noted that since late 2025, benchmark indices have experienced intermittent corrective phases of 5-8%, with export-oriented sectors such as IT, pharma, and select midcaps bearing the brunt of the pressure.

Economic Impact Assessment

Analysts have quantified the potential economic implications of the tariff threats, providing investors with concrete impact estimates. Ponmudi highlighted that estimates of the potential tariff impact on GDP for FY26 range between 0.5% and 0.7%, depending on the final scope of implementation and any countermeasures.

Despite these challenges, several factors continue to provide market support:

• Strong domestic consumption trends
• Resilient services exports performance
• Trade diversification toward the EU, ASEAN, and Middle East markets
• Controlled rather than panic-driven FPI selling patterns

Q3 Earnings as Market Catalyst

Market focus in the coming week will shift to third-quarter earnings from India Inc., with heavyweight IT companies expected to drive index-level direction. The earnings calendar features several major technology firms whose results will be closely scrutinized for broader market implications.

Investor attention will focus on several critical areas during earnings announcements:

• Trends in client IT budgets for the current year
• Signs of recovery in discretionary spending across industries
• Hiring plans, especially given tighter H-1B visa approvals
• Updates on progress in AI-led technologies and infrastructure development

Broader Market Triggers

Beyond corporate earnings, several macroeconomic indicators will influence market sentiment throughout the week. Ponmudi emphasized that key inflation and growth indicators will shape global risk appetite, with India's December CPI, WPI food, and manufacturing inflation data scheduled for release.

Vinod Nair, Head of Research at Geojit Investments, noted that the week began on a muted note as expectations of higher government borrowing drove bond yields upward, though strong GST collections and healthy bank credit growth provided some support. He pointed out that global headwinds include the Venezuela-US standoff, concerns over Russian oil imports, and China's restrictions on rare earth exports.

Market Outlook and Expert Perspectives

Analysts expect continued volatility in the near term, particularly affecting US-exposed companies and sectors such as metals and oil & gas. However, strong domestic fundamentals, resilient GDP growth, and robust credit trends could support selective buying opportunities where earnings prospects remain favorable.

Vinod Nair concluded that markets are expected to stay range-bound with a mixed bias, seeking balance between external risks and domestic fundamentals. Any positive outcome from India-US trade discussions or easing tariff concerns could potentially spark a short-term rebound, making diplomatic developments a key factor to monitor alongside corporate earnings performance.

Choice Broking's Executive Director Sumeet Bagadia has identified three stock opportunities for Monday trading, despite the Indian stock market experiencing its fifth consecutive session of decline. The benchmark indices faced significant pressure on Friday, with the Sensex falling 605 points to close at 83,576.24 and the Nifty 50 dropping 194 points to end at 25,683.30. Fresh concerns over US tariffs, cautious sentiment ahead of the Q3 earnings season, and persistent foreign fund outflows contributed to the market weakness.

Market Performance Analysis

The broader market indices also remained under pressure during Friday's session. The BSE Midcap index declined 0.90%, while the Smallcap index experienced a more significant drop of 1.74%. This widespread selling pressure reflected the challenging market environment across different segments.

Technical Analysis of Key Indices

Nifty 50 Outlook

Bagadia provided detailed technical analysis for the Nifty 50, noting that the index opened weak and extended its decline throughout the session. The index briefly breached the key support level of 25,800 and confirmed a decisive breakdown below this zone, reinforcing the short-term bearish bias and weakening market structure.

The technical indicators present a mixed picture for the Nifty 50:

• Immediate resistance: 25,800–25,850 zone
• Crucial support: 25,500–25,550 range
• Daily RSI: 38.55, trending lower and reflecting deteriorating momentum
• India VIX: Increased 3.07% to 10.92, indicating marginal pickup in volatility

Bank Nifty Assessment

The Bank Nifty experienced a particularly challenging session, opening flat but witnessing a sharp bearish move of nearly 590 points. The index registered an intraday low at 59,154, indicating aggressive profit booking and supply pressure at higher levels. Bagadia characterized this price action as a short-term consolidation-to-correction phase after recent gains.

Key technical levels for Bank Nifty include:

• Immediate resistance: 59,500–59,600 zone
• Critical support: 59,000–58,900 band
• Daily RSI: 47.96, trending lower and suggesting loss of upward momentum

Stock Recommendations for Monday

Despite the challenging market environment, Bagadia has identified three stock opportunities under ₹100 for Monday trading:

All three recommendations come with clearly defined risk management parameters, including specific stop-loss levels to protect against downside risks. The target prices suggest potential upside ranging from approximately 7% across all three picks.

Trading Strategy Recommendations

Bagadia advised maintaining a selective buy-on-dips strategy for the Nifty 50, provided the index holds above 25,600, with strict stop-losses placed at 25,500 to manage downside risk. For Bank Nifty, despite short-term weakness, he recommended maintaining a bullish bias and adopting a buy-on-dips strategy near key support levels, supported by disciplined risk management with appropriate stop-loss placements.