Indian benchmark indices extended their losing streak to five consecutive sessions on Friday, January 9, with the Sensex declining 605 points to settle at 83,576.24 and the Nifty 50 falling 194 points to close at 25,683.30. The sustained selling pressure, driven by concerns over US tariffs, caution ahead of the Q3 earnings season, and persistent foreign fund outflows, has resulted in significant weekly losses for both indices.

Market Performance Overview

The week's performance highlighted the challenging sentiment across Indian equity markets. Broader indices also faced pressure, with specific declines recorded across market segments.

According to Ajit Mishra, SVP Research at Religare Broking, "Markets witnessed a sharp sell-off during the week, with benchmark indices ending firmly in the red amid weak global cues and heightened uncertainty. Sentiment remained negative throughout the week and selling pressure intensified in the final sessions."

Key Market Triggers for the Coming Week

Q3 Earnings Season Launch

The third-quarter earnings season will commence with heavyweight IT companies taking center stage. Major technology firms are scheduled to report their December quarter results, representing nearly 13% of the Nifty's total weight.

Beyond the IT sector, other major corporations will also release their quarterly results:

• Reliance Industries: Expected to provide insights across energy, retail, and telecom segments
• HDFC Bank: Key banking sector indicator
• Jio Financial Services: Financial sector performance gauge

Ponmudi R, CEO of Enrich Money, emphasized the importance of management commentary: "Investor focus will be firmly on post-results management commentary and forward guidance. Key areas to watch will include trends in client IT budgets for the current year, signs of recovery in discretionary spending across industries, and hiring plans—especially in the context of tighter H-1B visa approvals."

Macroeconomic Data Releases

The week will feature several critical macroeconomic indicators that could influence market direction:

• CPI Inflation Data: Consumer price index trends
• WPI Inflation Data: Wholesale price index movements
• Trade Balance: Import-export dynamics
• Foreign Exchange Reserves: Currency stability indicators

US Tariff Developments

The US Supreme Court is scheduled to deliver decisions on January 14, including potential rulings on challenges to Trump's global tariff measures. The court did not release a ruling on Friday, January 9, regarding the case questioning the legality of the sweeping tariffs. Trump has defended the tariff policies, claiming they have strengthened the US economy and warning that overturning them would deliver a "terrible blow" to the nation.

Market Outlook and Investment Focus

Analysts expect the combination of earnings results, macroeconomic data, and global policy developments to create significant market volatility. The IT sector's performance will be particularly scrutinized for insights into global technology spending trends and AI-related growth opportunities. Management guidance on future business prospects, especially regarding artificial intelligence and infrastructure investments, will be closely monitored as potential growth drivers for the sector.

Indian equity markets endured their worst weekly performance in over three months, with broader market indices facing significant pressure amid rising geopolitical tensions, persistent foreign institutional investor (FII) selling, and concerns over potential US tariffs. The small-cap segment bore the brunt of the selloff, declining nearly 4% and significantly underperforming benchmark indices.

Market Performance Overview

The benchmark indices posted substantial declines during the week, reflecting widespread investor caution and risk-off sentiment.

The small-cap index's 4% decline highlighted the vulnerability of smaller companies to market volatility, with broader market indices remaining under sustained pressure throughout the week.

Sectoral Performance Analysis

Sectoral performance revealed a mixed picture, with energy-related sectors facing the steepest declines while defensive sectors showed resilience.

The Nifty Defence index emerged as a notable outperformer with a 1.3% gain, while the Consumer Durables index rose 1% on hopes of demand revival.

Institutional Investment Flows

Institutional investment patterns continued to reflect the divergent approaches of foreign and domestic investors.

Foreign Institutional Investors maintained their selling pressure, offloading equities worth ₹9,209.90 crore during the week. In contrast, Domestic Institutional Investors provided crucial market support by purchasing equities worth ₹17,594.58 crore.

Small-Cap Sector Impact

The BSE Small-cap index's nearly 4% decline was accompanied by severe selling pressure across individual stocks. Several small-cap companies experienced double-digit declines, with shares of multiple companies including Systematix Corporate Services, Balu Forge Industries, Worth Investment & Trading, VTM, Kiri Industries, and others tumbling between 15% and 23% during the week.

Technical Outlook

Market analysts suggest the Nifty's technical structure indicates continued weakness, with the index moving lower from the 50 EMA. The formation of a long bear candle on both daily and weekly charts signals potential further downside. Key support levels are identified around 25,700, with a break below this level potentially opening declines toward 25,400-25,500. Immediate resistance is placed at 25,850-25,900.

Market Drivers and Outlook

The week's performance was influenced by multiple global and domestic factors, including rising geopolitical tensions, concerns over potential US tariffs, and continued FII outflows. Despite these challenges, strong domestic fundamentals, including healthy GST collections and robust bank credit growth, provided some underlying support to market sentiment. Looking ahead, market direction will likely be shaped by clarity on global trade dynamics and upcoming quarterly earnings results.