The Nifty 50 extended its losing streak for a second consecutive session, closing 66 points lower at 25,665 amid persistent uncertainty surrounding the US-India trade deal. The benchmark index experienced significant volatility throughout the trading session, reflecting cautious investor sentiment and mixed global signals.

Market Performance and Volatility

The trading session began on a weak note with the Nifty 50 opening 84 points lower. However, the index demonstrated resilience in the first half, staging a notable recovery of 153 points from the day's low. This recovery proved short-lived as sentiment deteriorated in the latter half, with the index sliding 188 points from its intraday high of 25,791.

Individual Stock and Sectoral Movements

Within the Nifty pack, stock performance was notably divergent. Tata Steel, NTPC, and Axis Bank emerged as the top gainers, while Asian Paints, TCS, and Tata Consumer faced selling pressure as the session's biggest laggards.

Sectoral trends presented a mixed picture across different industry segments:

Outperforming Sectors:

• Metals
• PSU Banks
• Oil & Gas

Underperforming Sectors:

• Realty
• IT
• Auto

The Nifty Bank index continued its outperformance for the second consecutive session, driven by strong buying interest in PSU bank stocks.

Broader Market Resilience

Despite the benchmark's decline, broader markets demonstrated relative strength and outperformed the main indices.

Market Drivers and Global Factors

Investor caution stemmed from multiple factors, including expectations of a US Supreme Court ruling on the legality of tariffs imposed during a previous administration. Global markets are positioned to react to key macroeconomic data releases, with US PPI and retail sales data expected, followed by UK GDP, US S&P Manufacturing PMI, and US jobless claims.

Upcoming Earnings Focus

Several companies are set to announce quarterly results in the next session, including Jio Financial, HDFC Life, 360One WAM, LTTS, and Angel One. Additionally, Infosys remains in focus after reporting December quarter earnings and raising its FY26 constant currency revenue growth guidance to 3.00% to 3.50%, compared to its earlier forecast of 2.00% to 3.00%.

Technical Analysis and Market Outlook

Market analysts provided varied perspectives on the technical outlook. Key resistance levels are identified around 25,900-26,000, with support levels at 25,600 and 25,500-25,400. The Nifty Bank index faces resistance at 60,000-60,100, with potential upside targets at 60,600 and 61,000, while support is seen at 59,300-59,200. Current consolidation appears to be occurring between 25,473 and 25,900, with a decisive breakout expected to determine the next directional move.

Technical momentum indicators are painting a concerning picture for Indian equities, with the majority of Nifty 500 stocks showing signs of weakness following the recent market selloff. According to ICICI Securities analysis, broad-based selling pressure has significantly deteriorated market breadth across the country's top 500 shares.

Technical Breakdown Reveals Widespread Weakness

The data reveals a stark deterioration in technical indicators across the Nifty 500 universe:

When stocks trade below the 50-day moving average, it reflects a loss of short- to medium-term momentum, representing the average closing price over the past 50 trading days. Similarly, trading below the 200-day moving average signals a weakening long-term trend, suggesting sellers are dominating across sectors.

Market Performance and Breadth Deterioration

Dharmesh Shah, head of technicals at ICICI Securities, noted that "over the past week, broader selling pressure has weakened the market breadth further." The Nifty index has declined nearly 2% since reaching all-time highs on January 5 and dropped 2.5% in the past week, closing at 25,732.30 on Tuesday with a 0.2% decline.

The contrast with earlier market conditions is particularly striking. When the Nifty hit record highs earlier in January, 54% of stocks in the Nifty 500 universe were trading above both the 50-day and 200-day moving averages, indicating healthy broad-based participation in the rally.

Sector-Wide Pressure and Small-Cap Vulnerability

Nilesh Jain, head of derivatives and technical research at Centrum Broking, explained that "the market witnessed corrections for five consecutive sessions last week, given the lack of clarity on the India-US trade deal and the global uncertainties." The small-cap segment appears particularly vulnerable, with the small-cap index trading below both long-term and short-term averages.

Jain advised investors to "avoid small-cap stocks and focus on large-cap stocks where the margin of safety is higher," emphasizing the defensive positioning required in the current environment.

Approaching Oversold Territory

Despite the current weakness, analysts see potential opportunities emerging. Shah highlighted that "with only 30% of Nifty 500 stocks now trading above the 50-day SMA, we are approaching oversold territory, which can be a good opportunity for investors to buy quality names with strong earnings, with a medium-term view."

Historical analysis suggests that market breadth typically bottoms out when the percentage of stocks above the 200-day moving average falls below 15%, while rallies tend to exhaust themselves only when this figure climbs near 90%. This provides a framework for understanding potential market turning points.

Near-Term Outlook

While technical indicators suggest continued pressure, analysts expect some relief in the near term. Jain noted that "while a pullback or dead cat bounce is likely, a decisive up-move is not anticipated currently." The extreme readings in moving average indicators could signal potential trend reversals, though sustained recovery will likely require resolution of underlying concerns affecting market sentiment.