Indian equity markets are experiencing significant pressure, but the underlying reasons have more to do with global dynamics than domestic weaknesses, according to Deven Choksey, Managing Director of DRChoksey Finserv. Speaking on January 21, 2026, Choksey provided insights into the current market environment and sectoral challenges facing investors.

Global Forces Drive Market Correction

Choksey attributes the recent market correction primarily to global portfolio rebalancing activities. Investors are reducing their exposure to dollar-linked assets, which has created widespread selling pressure across emerging market equities, including India. This global shift has resulted in what Choksey describes as a disconnect between stock prices and actual business fundamentals.

Despite the technical weakness visible in market charts, Choksey emphasizes that underlying business conditions in India remain "extraordinarily robust." Corporate earnings continue to demonstrate strength, and operating performance across various sectors maintains healthy momentum.

IT Sector Faces Valuation Challenges

The mid-tier IT sector, including companies like Persistent Systems, is currently experiencing pressure due to elevated valuations rather than fundamental business issues. Choksey's analysis reveals no concerns regarding business fundamentals or earnings performance in this segment.

The IT sector correction appears to be primarily valuation-driven and could persist as the significant re-rating experienced over the past two to three years requires absorption through time correction and price adjustments.

Consumer and Alcohol Stocks Under Pressure

Consumer and alcohol stocks, including United Spirits, face particular vulnerability in the current environment. Choksey notes that even minor earnings disappointments can trigger sharp de-rating when stocks are priced for perfection. Policy uncertainties related to taxes, duties, or regulatory changes can lead to sustained pressure on these highly valued stocks.

Investment Strategy Recommendations

In this challenging environment, Choksey stresses the importance of patience and maintaining investments in quality companies rather than reacting to short-term market volatility. He characterizes the current situation as "collateral damage" caused by currency-related volatility and global uncertainty, rather than fundamental deterioration in Indian business conditions.

The market expert advises investors to focus on the strong corporate earnings and healthy operating performance across sectors, while acknowledging that the valuation-driven correction may require time to resolve through natural market mechanisms.

Indian equity markets experienced a sharp sell-off with broad-based selling pressure affecting investor sentiment across segments. The correction has been attributed to a combination of global uncertainties and domestic earnings disappointments, though fund managers maintain a cautiously optimistic outlook for the medium term.

Market Performance and Impact

Indian equity markets witnessed significant volatility with substantial losses across major indices. The selling pressure was broad-based, affecting different market segments with varying intensity.

Foreign institutional investors continued their selling trend, extending a pattern that has seen Indian equities underperform global peers over the past year. The selling pressure was particularly intense in small- and micro-cap stocks, with market breadth weakening significantly.

Global Factors Driving Volatility

Global developments played a central role in shaping market sentiment during the ongoing World Economic Forum in Davos. Heightened geopolitical tensions and uncertainty around global trade dominated investor discussions.

Chirag Mehta, Chief Investment Officer and Fund Manager at Quantum AMC, noted that the current volatility is not driven by domestic fundamentals. "It's more related to global uncertainties emanating from tariff-related issues and geopolitical developments," Mehta said. He emphasized that this is not an India-centric issue, adding that "India is more inward-looking, and much of the impact is already priced in."

Concerns around trade protectionism, including continued rhetoric from US President Donald Trump on imposing higher tariffs and threats on Greenland, added to worries about the global growth outlook and cross-border trade flows.

Earnings Disappointment Compounds Pressure

Earnings disappointment also contributed to negative sentiment, with market reactions being more severe than expected. Aishvarya Dadheech, Founder & Chief Investment Officer at Fident Asset Management, said the scale of the sell-off was unexpected, especially since geopolitical tensions over the weekend had not immediately impacted markets.

"What actually played out is the market's disappointment with the earnings season," Dadheech explained. Despite several large companies reporting results broadly in line with expectations, stocks saw sharp declines. "The market didn't really appreciate the numbers," he said, citing heavy falls in names such as ICICI Bank, HDFC Bank, and Havells.

Alok Agarwal, Head – Quant & Fund Manager at Alchemy Capital Management, highlighted additional domestic concerns. "The month started with poor GST numbers for December and subdued capex data for November," he said, adding that pressure to meet budgeted targets has increased amid slower economic momentum and weaker tax collections.

Cautiously Optimistic Outlook

Despite near-term challenges, fund managers expressed confidence in India's medium-term prospects. Mehta noted that India is in a much better position after nearly 1.5 years of relative underperformance, with the valuation premium having narrowed. "As global uncertainties subside, India should see lesser impact compared to other markets," he said.

Agarwal echoed a cautiously constructive outlook, stating that while volatility may persist in the near term, medium-term prospects are supported by policy action and improving valuations. "The coordinated steps taken by the Government and the RBI to reactivate the economy are likely to show effect in coming months," he said.

Investment Opportunities Emerge

Fund managers acknowledged that the current correction is creating selective opportunities across various sectors. Mehta stressed the importance of a disciplined, bottom-up approach, noting that they "were cautious on markets over the last year and kept cash levels elevated."

"As markets have corrected and many mid- and small-cap stocks are down 30–40 percent or more, there is potential opportunity," Mehta said, adding that investment decisions need to be stock-specific and factor in how global events could affect earnings.

Dadheech emphasized their continued bullish stance, stating they "remain bullish and do not believe in taking cash calls." Their focus remains on fundamentals rather than trying to time the market, with valuations across several companies having become attractive following the correction.