Indian equity markets concluded the week with substantial losses, breaking a two-week winning streak and posting their most significant weekly decline in four months. The broad-based selling pressure resulted in BSE-listed companies losing market capitalisation worth over ₹15 lakh crore during the week.

Weekly Performance Overview

The benchmark indices faced considerable headwinds throughout the week, with selling pressure intensifying across sectors. The Nifty index declined nearly 2.5% for the week, while all sectoral indices concluded in negative territory, with some sectors witnessing declines as steep as 6.00%.

The Nifty Bank index demonstrated relative outperformance compared to other sectors but still registered a decline of 1.5%. The midcap index mirrored the benchmark's performance, shedding over 2.5% during the week.

Friday's Market Action

Markets remained under pressure on Friday, extending losses for the fourth consecutive session. The Sensex fell 605.00 points to close at 83,576.00, while the Nifty dropped 194.00 points to settle at 25,683.00, slipping below the psychologically important 25,700 mark.

Market breadth remained firmly negative throughout the session, with the advance-decline ratio standing at 1:4. Over 20 Nifty constituents declined more than 1.00%, while six stocks registered losses exceeding 2.00%.

Sectoral Performance and Stock Movements

Among the major laggards for the week, 35 Nifty stocks concluded with losses. The top weekly underperformers included:

• Adani Enterprises
• NTPC
• Adani Ports
• ICICI Bank

In the midcap segment, several stocks faced significant selling pressure:

• Premier Energies
• Waaree
• Inox Wind
• NBCC
• Jindal Stainless
• HPCL

Realty stocks emerged as the worst performers on Friday amid continued foreign investor selling, with Godrej Properties leading the sector's decline. Capital market stocks also remained under pressure, with 360 ONE falling over 4.00%.

Notable Stock Movements

Despite the broader market weakness, certain sectors and stocks provided some relief. Metal stocks bucked the negative trend, with Nalco and Hindustan Zinc posting gains. Higher crude oil prices supported upstream oil companies, lifting ONGC and Oil India by 1.00-2.00%.

Several individual stocks witnessed significant movements due to specific developments:

Vodafone Idea and Indus Towers concluded off their day's highs despite experiencing some relief regarding AGR dues developments.

The week's performance reflects broad-based selling pressure across Indian equity markets, with investors remaining cautious amid various sectoral and stock-specific concerns. The significant market capitalisation erosion and widespread sectoral declines highlight the challenging environment faced by market participants during this period.

Indian equity markets are expected to remain range-bound for an extended period as elevated valuations and subdued earnings growth limit upside potential, according to Ajay Tyagi from UTI AMC. Speaking to ET Now, Tyagi emphasized that while domestic institutional investors continue providing market support, structural challenges persist in current market conditions.

Market Consolidation and Valuation Concerns

Tyagi noted that Indian markets have been trading at a premium to long-term averages since 2024, with the consolidation phase beginning after markets peaked around August 2024. The prolonged consolidation spanning nearly 18 months has been primarily driven by weaker-than-expected earnings growth.

"Markets were building in stronger-than-trend earnings growth and were disappointed," Tyagi explained, adding that his forecast suggests markets could remain range-bound for approximately one more year.

FY27 Growth Expectations Already Factored In

While FY27 is expected to witness earnings acceleration supported by policy measures aimed at boosting consumption, Tyagi cautioned that markets have already incorporated much of this optimism. The consensus estimates project 16% earnings growth for FY27 over FY26, driven by income-tax benefits and GST rationalization measures that could result in household savings of nearly $35 billion.

"To some extent, all of these positive measures are already built in, and despite that, valuations remain elevated," Tyagi stated. "So yes, we may see better growth from corporate India, but whether markets move up substantially on the back of those numbers is doubtful."

Sectoral Opportunities Emerge

Despite broad market challenges, Tyagi identified valuation comfort in select sectors, particularly private sector banks, IT, and automobiles. Private sector banks present attractive opportunities as they have not participated in recent rallies and currently trade at discounts to long-term averages.

The IT sector, which has underperformed over the past two to three years, offers relative value as valuations approach long-term averages. Tyagi dismissed concerns about AI disruption, noting that "history shows that whenever a new technology comes in, Indian IT companies gain over the medium term."

Auto Sector Preferences

Within the automobile sector, Tyagi expressed a clear preference for original equipment manufacturers (OEMs) over ancillary companies, calling the valuation gap "inexplicable." OEMs have demonstrated superior performance across multiple timeframes while trading at significantly lower multiples than ancillaries.

"Over three, five and ten years, OEMs have delivered better outcomes, yet they trade at significantly lower multiples than ancillaries," he observed. OEMs offer stronger balance sheets, superior return ratios, and better growth visibility compared to their ancillary counterparts.

Among OEMs, passenger vehicles, including utility vehicles, present the most compelling structural growth opportunity due to under-penetration and rising per capita income levels that will enable more households to afford passenger cars.