Indian equity markets ended the week under pressure as the benchmark Nifty index witnessed a sharp correction of over 5% from its all-time high in just 11 trading sessions. The decline was driven by persistent foreign institutional investor outflows, profit-booking activities, and concerns over global trade disruptions. Despite early optimism from selective banking gains and earnings upgrades at Infosys, broader market sentiment turned negative following underwhelming sectoral results and earnings disappointments.

Technical Analysis Shows Bearish Momentum

According to Sudeep Shah, Vice President and Head of Technical & Derivatives Research at SBI Securities, the Nifty's technical structure has deteriorated significantly. The index has slipped below its 200-day EMA for the first time since April 2025 and formed a sizeable bearish candle on the weekly chart.

The correction has been broad-based, with heavy selling pressure in index heavyweight stocks. On a month-to-date basis, major constituents have declined significantly, with ITC falling around 20%, Reliance Industries down nearly 12%, L&T declining 8.32%, HDFC Bank dropping 7.58%, and Bharti Airtel falling nearly 6%.

Broader Market Shows Deeper Weakness

The pain extends beyond frontline indices, with both Nifty Midcap 100 and Nifty Smallcap 100 witnessing sharp corrections. The Nifty Midcap 100 has slipped below its 200-day EMA, while the Nifty Smallcap 100 is trading over 7% below its 200-day EMA, highlighting strong bearish momentum across the broader market space.

FII Outflows vs DII Support

Foreign institutional investors have pulled out over Rs 30,000 crore in January alone, showing no signs of stopping. However, domestic institutional investors continue to provide crucial support. Since July 2025, while FIIs have sold nearly Rs 2.24 lakh crore, DIIs have absorbed around Rs 4.85 lakh crore, largely cushioning the market impact.

PSU Banks Outperform Private Peers

A clear divergence emerged this week as PSU banks rallied nearly 5% while private banks remained subdued. The Nifty PSU Bank index is outperforming frontline indices and trading comfortably above key moving averages. In contrast, the Nifty Private Bank index continues to underperform with sluggish price action.

The ratio chart of Nifty PSU Bank versus Nifty Private Bank is forming a healthy sequence of higher highs and higher lows, reinforcing the strength of the PSU banking space on a relative basis.

Sectoral Outlook and Stock Recommendations

From a technical perspective, IT and Metal sectors are displaying clear signs of outperformance compared to frontline benchmarks, holding firmly above their short-term and medium-term moving averages. Meanwhile, sectors like Realty, Consumer Durables, Healthcare, and Automobiles are expected to continue underperforming in the short term.

Technically attractive stocks ahead of Budget:

• Tech Mahindra
• HCL Tech
• Hindustan Unilever
• Indian Bank
• JK Tyre

With the Union Budget just a week away and current technical weakness, Shah recommends staying on the sidelines and preserving cash until clearer directional cues emerge after the Finance Minister's announcement.

Indian equity markets extended their losing streak on Friday, January 23, with both benchmark indices posting notable declines amid challenging market conditions. The session was marked by broad-based selling pressure, currency weakness, and continued foreign institutional outflows.

Market Performance Overview

The trading session reflected the ongoing bearish sentiment across Indian equities. Key market movements included:

Intraday Trading Dynamics

The Nifty experienced heightened volatility during the trading session, with the index touching deeper lows during intraday trading. The benchmark index plunged 264.60 points or 1.04% to hit an intraday low of 25,025.30, indicating intensified selling pressure before recovering marginally toward the close.

Key Market Pressures

Several factors contributed to the market's downward momentum:

• Broad-based selling: Widespread selling across sectors weighed on overall market sentiment
• Currency weakness: The rupee's depreciation to record low levels added to investor concerns
• Foreign outflows: Continuous selling by foreign institutional investors maintained pressure on equity markets

Technical Significance

The market's breach of the 200-day moving average represents a significant technical development, potentially signaling extended weakness in the near term. This technical breakdown comes as markets approach the monthly expiry, which could introduce additional volatility in trading sessions ahead.

The synchronized decline across both benchmark indices reflects the challenging environment facing Indian equities, with multiple headwinds converging to pressure market performance.