Indian equity markets have shown resilience in recent sessions, with market breadth remaining supportive despite incremental weakness over the past week. While near-term volatility has emerged, market experts believe the broader structural story remains intact, driven by improving earnings visibility and potential global developments.

Mixed Earnings Performance with Improving Outlook

Mayuresh Joshi, Head Equity at Marketsmith India, noted that the current earnings season has delivered mixed results. PSU banks have largely held up in terms of earnings delivery, while other sectors have performed in line with estimates or slightly below expectations.

However, Joshi expects the earnings outlook to improve meaningfully as the year progresses. He pointed out that once channel inventory rationalisation plays out post-GST, particularly across consumer durables, discretionary and staple segments, numbers could see a sharp rebound.

Global Factors and Market Volatility

According to Joshi, global events remain a key overhang for market performance. Markets could remain volatile depending on geopolitical developments and trade-related commentary from the US. He specifically mentioned concerns about potential policy changes and their impact on market sentiment.

On the positive side, Joshi highlighted the potential impact of international trade agreements. The India-EU FTA deal could be a massive game changer for India as it materialises. Additionally, any potential US trade deal in the coming days and weeks could allay market concerns and refocus attention back to earnings fundamentals.

Small Finance Banks Show Promise

Select small and mid-sized banks have emerged as recent outperformers, with strong price action following earnings announcements. Stocks such as CreditAccess Grameen, Ujjivan and Bandhan Bank have been in focus amid signs of improving fundamentals.

Joshi noted that expectations for small finance and payment banks are improving as stress in the ecosystem begins to ease. Earlier challenges stemming from MSME slowdowns and delinquency issues appear to be stabilising.

Market Positioning and Opportunities

Despite acknowledging a rise in distribution days tracked by Marketsmith India, Joshi stressed that such phases often create opportunities for identifying quality sectors and leadership stocks that could form the basis for the next bull run.

As growth expectations strengthen, asset quality pressures in the banking sector are likely to moderate. The expectation is that both reported numbers and return ratios should show improvement, which the market is closely watching.

While near-term volatility cannot be ruled out, the improving earnings outlook and stabilising financial sector trends suggest that markets may be better positioned as they move forward, provided global uncertainties do not escalate significantly.

Foreign institutional investors (FIIs/FPIs) net sold ₹2,550 crore worth of Indian equities on January 22, while domestic institutional investors (DIIs) provided strong counterbalance by net buying ₹4,223 crore worth of shares, according to provisional exchange data. Despite the foreign selling pressure, Indian equity markets managed to end the session on a positive note amid volatile trading conditions.

Institutional Investment Flows

The institutional trading activity on January 22 showed a clear divergence between foreign and domestic investors:

For the year-to-date period, the trend continues with FIIs being net sellers worth ₹36,587 crore, while DIIs have net purchased shares worth ₹50,718 crore, highlighting the sustained support from domestic institutional investors.

Market Performance and Volatility

Indian equity markets ended January 22 on a volatile but positive note despite choppy trading and cautious sentiment. The benchmark indices showed resilience:

Market breadth remained positive throughout the session, indicating selective buying interest among investors. The Nifty 50 opened strongly and touched an intraday high of 25,435 but failed to sustain higher levels due to selling pressure at elevated zones. The index subsequently slipped below the 25,300 support level, hitting an intraday low of 25,168, before recovering to close at 25,289.90.

Technical Analysis and Key Levels

According to Choice Broking's market analysis, the Nifty managed to hold above its 200-day DEMA, highlighting underlying support despite the intraday volatility. Key technical levels for the Nifty include:

• Immediate Resistance: 25,400–25,450 zone
• Key Support: 25,100–25,150 zone
• Daily RSI: 33.82 (trending upward, signaling mild momentum improvement)

The Bank Nifty also demonstrated similar volatility patterns, opening strong and surging nearly 850 points to an intraday high of 59,573.10 before witnessing profit booking that dragged the index below 59,000 to an intraday low of 58,823. The index later recovered to close at 59,200, indicating buying interest on declines.

Volatility and Market Sentiment

Market volatility showed signs of easing, with India VIX declining 3.12% to 13.35, indicating reduced fear among market participants. Derivatives data revealed heavy call writing at the 25,400 strike and significant put writing at the 25,200 strike, establishing this range as a key near-term pivot for the markets.