Indian equity markets witnessed significant corrective pressure during a volatile trading week, with benchmark indices ending substantially lower. The Nifty experienced persistent selling pressure throughout the week, reflecting broader market uncertainty and risk-off sentiment among investors.

Market Performance Overview

The benchmark Nifty index demonstrated extreme volatility, oscillating within a wide intra-week range of 733 points as it moved between the high of 25,653 and low of 24,919. This substantial range highlights the intense battle between bulls and bears during the trading sessions.

The India VIX surged sharply by 24.80% to reach 14.19, indicating a sudden spike in risk perception and market uncertainty. This volatility spike suggests investors are pricing in higher uncertainty for near-term market movements.

Technical Analysis and Key Levels

The current technical structure of Nifty reflects a significant breakdown from previous consolidation patterns. After failing to confirm a breakout, the index has slipped below the trendline drawn from the high formed in September 2024. The index has also breached the short-term 20-week moving average and now hovers near the lower Bollinger Band.

The region of 25,000–25,150, which includes the 200-DMA on the daily chart, represents a key support zone currently being tested. If this zone is violated convincingly, it may trigger a deeper corrective move. Conversely, any bounce would remain vulnerable unless the index reclaims the 25,650 levels.

Sector Rotation Analysis

Relative Rotation Graphs comparing various sectors against the CNX500 Index reveal distinct sectoral trends. The analysis shows sectors positioned across different quadrants based on their relative performance and momentum.

Leading Quadrant (Outperformers):

• Nifty IT Index (strong rotation)
• Financial Services Index
• Midcap 100
• PSU Bank Index
• Banknifty
• Metal Index
• Services Sector Index

Weakening Quadrant:

• Infrastructure Index
• Nifty Auto Index

Lagging Quadrant (Underperformers):

• Nifty Energy Index
• Realty Index
• FMCG Index

Improving Quadrant:

• Pharma Index (rolled back from leading quadrant)

Week Ahead Outlook

Given the steep correction and mildly oversold setup on the daily chart, the coming week may see a tentative start with possible technical rebound. However, the week will be shortened by the Republic Day holiday on Monday, and Tuesday marks the monthly F&O expiry, which typically brings additional volatility.

The weekly chart shows a long black candle, signifying strong selling pressure and breakdown from prior consolidation. Pattern-wise, Nifty has broken below the falling trendline with bearish implications, confirmed by a wide-range candle and close below the 20-week moving average.

Trading Strategy

For the week ahead, a cautious and stock-specific approach is recommended. While short-term oversold conditions may fuel a bounce, the broader technical structure has weakened considerably. Traders should avoid aggressive long positions and focus on protecting existing profits. Any upside movement should be utilized to lighten positions or initiate low-risk short opportunities if resistance levels hold. The approach should emphasize high selectivity, tight risk management, and light exposure ahead of expiry volatility.

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.