Indian equity markets endured a challenging week as multiple US-driven concerns triggered widespread selling pressure across sectors. The benchmark Nifty 50 recorded its sharpest weekly decline since September 2025, falling 2.50% to close at 25,683.30 on Friday and slipping below the psychologically significant 26,000 mark.

Market Performance and Key Triggers

The market faced a trio of negative developments from the United States that dampened investor sentiment throughout the week. US Commerce Secretary Howard Lutnick's announcement on Friday signaled a potential delay in the India-US trade agreement, adding to existing concerns about bilateral trade relations.

Further pressure emerged from the proposed Sanctioning Russia Act of 2025, which advanced in Congress and threatens tariffs of up to 500% on countries continuing to purchase Russian oil. This development raised significant concerns about India's economic growth prospects and overall market stability.

Sectoral Performance Analysis

While the broader market retreated across all five trading sessions, sectoral performance showed notable divergence. Consumer durables emerged as the sole outlier, rising 2.40% during the week, driven by festive demand spillover and positive third-quarter expectations for companies like Havells and Polycab.

The oil and gas sector bore the brunt of tariff-related anxiety, with Reliance Industries experiencing a significant 7.40% decline that erased nearly $15.00 billion in market capitalization. This substantial loss highlighted the sector's vulnerability to international trade policy developments.

Global Context and Currency Impact

India's market performance stood out negatively on the global stage, recording the steepest declines among major developed and emerging markets. This contrasted sharply with several Asian peers, including South Korea, Taiwan, and Indonesia, which managed to end the week in positive territory.

The Sensex logged its worst start to a new year in a decade, falling nearly 2.00% in the first seven trading sessions. This performance marked a significant deterioration compared to the previous year, when the index saw only a marginal decline of 0.70% during the same period.

Upcoming Earnings Season and Market Outlook

Market attention will now shift to the December-quarter earnings season, which begins next week with IT sector heavyweights Tata Consultancy Services and HCL Technologies scheduled to report results on Monday. Nearly 40 Nifty 500 companies are expected to announce third-quarter FY26 results, with major players including Infosys, Wipro, and Reliance Industries likely to influence broader market sentiment.

The IT sector faces particular scrutiny as companies navigate seasonal furloughs and margin pressures following a subdued second quarter. Early positive results from these bellwether companies could potentially reinforce the earnings recovery narrative and provide much-needed support to market sentiment.

Investors will also closely monitor the December retail inflation data release scheduled for Monday, along with a key US Supreme Court ruling on American tariffs, both of which could provide additional direction for market movements in the coming sessions.

Indian stock markets have experienced significant volatility in recent sessions, declining sharply after touching record highs. The market turbulence has been primarily driven by foreign investor outflows and concerns over elevated stock valuations, creating uncertainty among market participants about whether this represents a temporary correction or the beginning of a deeper bearish phase.

Market Performance and Key Concerns

The benchmark NIFTY 50 index reached an all-time high of 26,373 points before experiencing a notable decline. The market correction has been substantial, with the index falling nearly 3% from its peak levels.

The selling pressure from foreign institutional investors, combined with stretched valuations where stocks appear expensive relative to their earnings, has created a challenging environment for market participants. Additionally, uncertain global cues have contributed to the overall market weakness.

Analyst Perspective on Market Outlook

Bernstein analyst Rupal Agarwal provides a measured view of the current market situation, suggesting that Indian markets are not yet ready to be given an 'underweight' classification. According to her analysis, the present scenario represents a fairly balanced risk-reward situation for investors.

While acknowledging the existing challenges, Agarwal identifies several persistent issues that continue to affect market sentiment:

• Stretched valuations with high prices compared to earnings
• Increased risk premiums as investors demand higher returns due to uncertainty
• A challenging stock-picking environment

Positive Factors Supporting Market Resilience

Despite the current headwinds, several positive developments continue to support Indian equities. Corporate earnings are showing signs of gradual recovery, with expectations that a significant number of companies will demonstrate improved performance in upcoming quarters.

Domestic investment flows from Indian investors and mutual funds have remained consistently robust, helping to partially offset the impact of foreign selling pressure. This domestic resilience has provided crucial support during the current period of foreign investor withdrawal.

Market Assessment and Future Outlook

The current market volatility appears to be driven more by short-term concerns rather than fundamental structural problems within the Indian economy. While high valuations and foreign investor outflows present definite challenges, the broader economic picture suggests relative stability.

The expectation is that once global market conditions stabilize and uncertainty diminishes, foreign institutional investors are likely to return to Indian markets. This potential reversal in foreign investment sentiment could provide additional support to market recovery.

Investment Approach During Volatility

The current market environment suggests that this downturn may represent a temporary pause rather than the onset of a prolonged decline. For investors navigating this period of uncertainty, maintaining a long-term investment approach appears more prudent than making reactive decisions based on short-term market movements.

The combination of improving earnings prospects, resilient domestic investment flows, and the potential for foreign investor return once global conditions improve supports a cautiously optimistic outlook for Indian equity markets in the medium to long term.