The Indian equity markets displayed significant weakness on January 23, with the Nifty 50 shedding nearly 1 percent and breaking below crucial technical levels. The benchmark index failed to sustain follow-up buying momentum and closed decisively below the 200 DEMA, accompanied by above-average trading volumes that confirmed the bearish sentiment.

Technical Analysis and Key Levels

The Nifty 50 formed a long bearish candle on daily charts after neutral candlestick patterns in previous sessions, indicating clear weakness. The index currently trades below all key moving averages, with short-term moving averages trending downward. Technical indicators paint a bearish picture:

Nifty 50 Support and Resistance Levels

Banking Sector Under Pressure

The Bank Nifty also displayed significant weakness, forming a long red candle following Doji candlestick pattern formation. The index broke decisively below the 58,800 zone, which had previously acted as strong support, and closed below the lower Bollinger Bands.

Options Data Analysis

The options data reveals key sentiment indicators across both Nifty and Bank Nifty contracts:

Nifty Options Activity

Call Options:

• Maximum open interest at 25,500 strike (1.68 crore contracts)
• Significant Call writing at 25,300 strike (73.99 lakh contracts added)
• Notable unwinding at 24,650 strike (14,300 contracts shed)

Put Options:

• Maximum open interest at 24,500 strike (88.96 lakh contracts)
• Heavy Put writing at 24,700 strike (21.93 lakh contracts added)
• Major unwinding at 25,200 strike (41.08 lakh contracts shed)

Market Sentiment Indicators

Several key indicators reflect the current market mood and potential direction:

The India VIX surge to 14.19 represents the highest closing level since June 19, 2025, with short- and medium-term moving averages trending upward, signaling continued uncertainty.

Market Activity Summary

The broader market participation showed mixed signals across different trading strategies:

• Long Build-up: 9 stocks showed increased open interest with price gains
• Long Unwinding: 112 stocks experienced declining open interest with falling prices
• Short Build-up: 72 stocks saw increased open interest amid price declines
• Short Covering: 20 stocks witnessed decreased open interest with price increases

F&O Ban Updates

The derivatives segment saw changes in the ban list:

• Stocks retained in F&O ban: Sammaan Capital
• Stocks removed from F&O ban: Bandhan Bank
• Stocks added to F&O ban: Nil

Experts anticipate continued consolidation in the benchmark index, with the previous week's low of 24,900 acting as immediate support. A convincing break below this level could open doors for further decline toward the 24,600-24,500 zone, which would serve as a crucial support area for market stability.

As India approaches the Union Budget for FY26-27, scheduled for February 1, historical data reveals a consistent pattern of market caution in the pre-Budget period. The Union Budget has traditionally served as a major market-moving trigger, influencing sectoral leadership and shaping short- to medium-term trends based on fiscal priorities and policy directions.

Historical Performance Analysis

According to Rahul Sharma, Director and Head of Technical & Derivative Research at JM Financial Services, the pre-Budget phase has historically been characterized by restraint rather than optimism. The data presents a clear picture of market behavior during this period.

Sharma noted that this trend reflects broader market behavior, with Nifty delivering negative returns in the month preceding the Budget in four of the last five years, including January 2025. The data from 2010 to 2022 shows that markets often drift lower ahead of the event due to fears of policy surprises, despite common post-Budget rebounds.

Technical Outlook

Ravi Singh, Chief Research Officer from Master Capital Services, provided technical analysis for the upcoming week. The weekly chart and candlestick pattern suggest further downside potential in the near term.

Singh indicated that a break below the 24850 support level could drag the index toward 24600, while sustained strength above 25250 could lead to a recovery toward 25500. Until then, a sell-on-rise strategy remains preferable.

Budget 2026 Expectations

The Union Budget 2026, to be presented by Finance Minister Nirmala Sitharaman, is expected to balance fiscal discipline with growth support amid global headwinds. Key expectations include:

• Higher capital expenditure on infrastructure, defense, and railways
• Potential increase in defense allocation
• Targeted measures for MSMEs, manufacturing, and green energy
• Focus on artificial intelligence and exports
• Faster GST refunds and higher logistics investments

The fiscal deficit is projected at 4.4% of GDP, with continued emphasis on job creation, rural demand, and sustainable growth as India moves toward its $5 trillion economy ambition.

Market Risks and Challenges

Several risk factors could impact market performance around the Budget announcement:

• Budget-day volatility if growth stimulus disappoints
• Fiscal target slippages potentially pushing bond yields higher
• Geopolitical tensions and currency volatility
• Global trade disruptions
• Domestic policy execution delays
• Valuation concerns and foreign institutional investor outflows

Expert Perspective on Market Behavior

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, emphasized the behavioral pattern around Budget events. "Markets tend to turn cautious ahead of the event. On average, backward returns are marginally negative, indicating profit-booking and risk reduction as uncertainty peaks. The post-Budget phase is where conviction returns, as forward returns improve meaningfully once policy clarity emerges," Sheth explained.

Sheth added that historically, patience has proven more valuable than prediction, with investors benefiting from waiting for clarity rather than reacting to Budget-day headlines. As February 1 approaches, historical patterns suggest that while market nerves may dominate the lead-up period, real opportunities for the Nifty often emerge only after policy clarity is established post-Budget.