Indian stock markets remained closed on Thursday for the Maharashtra Municipal Corporation Elections, setting the stage for Friday's trading session amid mixed global cues and ongoing domestic concerns. The previous trading session on Wednesday saw continued weakness in benchmark indices, reflecting fragile investor sentiment despite selective sectoral strength.

Wednesday's Market Performance

The benchmark indices extended their declining trend on Wednesday, with both major indexes posting significant losses. Market performance showed continued pressure from multiple headwinds affecting investor confidence.

The decline marked the seventh loss in eight sessions for both indexes, highlighting the persistent weakness in market sentiment. Concerns over potential US tariffs and continuous foreign institutional investor outflows weighed on market performance, though gains in metal and banking stocks provided some support.

Market Activity and Trading Patterns

Trading activity remained concentrated in specific sectors, with notable volume and value movements across various counters. The most active stocks by turnover reflected investor focus on banking, metals, and select industrial segments.

Top Stocks by Value Turnover:

• HDFC Bank: ₹3,411 crore
• Vedanta: ₹3,064 crore
• Hindustan Copper: ₹3,004 crore
• ICICI Bank: ₹1,972 crore
• Hindustan Zinc: ₹1,822 crore

Most Active by Volume:

• Vodafone Idea: 69.75 crore shares
• MMTC: 11.95 crore shares
• Union Bank India: 8.85 crore shares
• Bank of Maharashtra: 7.7 crore shares

Global Market Developments

US markets demonstrated resilience on Thursday, recovering from a two-day decline driven by strong performance in technology stocks. The chip sector led the rally following TSMC's impressive quarterly results, with the Taiwan-based company predicting robust annual growth and announcing plans for expanded US manufacturing capacity.

European markets continued their record-breaking run, with major indices including FTSE, DAX, and STOXX reaching new highs. The pan-European STOXX 600 gained 0.4%, with technology stocks adding 1.8% to reach levels not seen since 2000.

Technical Analysis and Market Outlook

Technical indicators suggest continued weakness in the near term, with the Nifty failing to move above key moving averages. The index remained below the 21 EMA throughout Wednesday's session, indicating prevailing weak trends. The bearish crossover between 21 EMA and 50 EMA remains intact, reinforcing negative sentiment.

Key technical levels for Friday's session include support at 25,600, below which deeper correction may unfold, while resistance is placed at 25,835.

Market Sentiment and Sectoral Performance

Overall market sentiment remained bearish, with declining stocks outnumbering advancing ones. Out of 4,344 stocks traded on BSE Wednesday, 2,219 witnessed declines while 1,960 saw advances. Notable buying interest was observed in MMTC, Jupiter Wagons, MRPL, Union Bank India, and metal stocks, while selling pressure affected technology and consumer stocks including Tata Elxsi, V-Guard, and Polycab India.

The session saw 88 stocks hit 52-week highs, including SBI and Tata Steel, while 222 stocks slipped to 52-week lows, reflecting the mixed undercurrents in individual stock performance despite overall market weakness.

The Indian stock market has witnessed its most challenging start to a calendar year in over a decade, with market participants grappling with significant outflows and policy uncertainty. In the opening trading sessions of 2026, the markets have experienced substantial selling pressure, resulting in considerable erosion of investor wealth. The benchmark indices have struggled to find direction amid a confluence of domestic and international factors weighing on sentiment.

Market Performance and Capitalisation Impact

The scale of the market decline has been substantial, affecting the overall valuation of Indian equities. The performance metrics highlight the severity of the current market stress.

Foreign Investment Flows and Market Positioning

Foreign institutional investors have adopted an increasingly bearish stance on Indian markets, significantly impacting market dynamics. The FII positioning reflects deep concerns about near-term market prospects and policy developments.

Chakri Lokapriya, CIO-Equities at LGT Wealth, explained the market sentiment: "The market is kind of waiting for that one word called tariff. Until there is a kind of resolution, we are going to be range-bound because that creates a lot of uncertainty." Negotiations are expected to restart this week, though this development has provided only limited relief to market participants.

Technical Analysis and Trading Ranges

From a technical perspective, the benchmark indices are displaying limited conviction and have entered defined trading ranges. Market analysts are closely monitoring key support and resistance levels to gauge future directional moves.

Rupak De, Senior Technical Analyst at LKP Securities, provided his assessment: "In the short term, sentiment is likely to remain weak with potential for further downside. Support is placed at 25,600, below which a deeper correction may unfold. On the higher end, resistance is placed at 25,835."

Market Outlook and Investment Strategy

Fund managers and market experts are maintaining a cautious stance while acknowledging potential opportunities for long-term investors. The current market environment is characterised by multiple uncertainties that are likely to persist in the near term.

Harsha Upadhyaya, CIO at Kotak Mahindra AMC, noted: "While the valuations may have corrected to some extent in the largecaps and certain midcaps, at the broader end of the market, the valuations are still expensive. Until and unless there is a real pickup in earnings growth for small caps, we may not see all-around positiveness."

Arbind Maheshwari, Head of India Equities at BofA Securities, outlined expectations for 2026: "In CY26, Nifty returns will likely be driven by earnings growth rather than valuation re-rating, as Nifty trades near +1SD (~21-21.5x 1Y forward PE), leaving limited scope for further expansion unless earnings accelerate sharply."

Key Market Factors

Several factors are contributing to the current market environment:

• Policy Uncertainty: Delays in India-US tariff deal negotiations
• Budget Expectations: Upcoming Union Budget in February with focus on capital expenditure
• Earnings Season: Ongoing quarterly results providing mixed signals
• Valuation Concerns: Expensive valuations in broader market segments

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, advised: "What smart investors should do in uncertain, volatile times like now is to remain invested and continue investing in fairly valued quality growth stocks for the long term."