Indian equity markets witnessed sharp selling pressure last week, with benchmark indices posting significant declines amid weak global cues and elevated uncertainty. The Sensex tumbled 2.55% to close at 83,576.24, while the Nifty declined 2.45% to 25,683.30, representing one of the steepest weekly drops in recent months. Broader markets underperformed the frontline indices, reflecting a distinct risk-off sentiment across the board.

Global developments dominated market sentiment throughout the week. Fresh concerns over potential sharp increases in US tariffs on Indian exports created uncertainty around India-US trade relations, triggering widespread risk aversion among investors. Geopolitical tensions involving the US and Venezuela further dampened market confidence, while sustained selling by foreign institutional investors kept pressure on equities.

Q3 Earnings Season Begins

The upcoming week marks the commencement of the earnings season for the third quarter of FY26. Major corporate giants are scheduled to report their financial results, providing crucial insights into business performance and sectoral trends.

Macroeconomic Data Calendar

Investors will closely monitor a busy macroeconomic calendar featuring several key data releases. The scheduled economic indicators will provide important cues about India's inflation trajectory and external sector stability.

Key Data Releases:

• CPI inflation figures
• WPI inflation data
• Trade balance statistics
• Foreign exchange reserves update

Global Factors and Market Drivers

Trump Tariffs Development: Markets worldwide will keenly watch developments around the US Supreme Court verdict on the legality of Trump-era tariffs, which could serve as a significant sentiment driver for global trade and emerging market equities.

Geopolitical Landscape: Ongoing geopolitical developments will remain on investors' radar, with potential implications for market stability and risk appetite.

Institutional Activity and Currency Movements

Foreign institutional investors recorded net sales of ₹3,609.00 crore in Indian equities on Friday, while domestic institutional investors emerged as net buyers with purchases worth ₹5,341.01 crore. This divergence in institutional activity continues to influence market dynamics.

The Indian rupee faced pressure during the week, weakened by domestic equity market declines and continued FII selling. Volatility in the dollar index, driven by key US economic data releases, has further impacted the currency. Additionally, elevated commodity prices are increasing the import bill, maintaining downward pressure on the rupee.

Technical Analysis and Market Outlook

The Nifty closed lower for the fifth consecutive session, experiencing sustained selling pressure throughout the week. This marked a complete week of declines across all five trading days, with the total 2.45% drop representing the highest weekly fall since the week ending September 26, 2025.

According to technical analysis, the Nifty now trades below its 20-day and 50-day exponential moving averages, signaling a shift to a positional downtrend. A decisive break below the 100-day EMA at 25,619.00 could accelerate selling toward the next major support level at 25,318.00. Any recovery attempts are likely to face strong resistance in the 25,950.00-26,000.00 zone.

Indian equity markets are bracing for an action-packed week ahead, with domestic corporate earnings, key macroeconomic data releases, and significant global developments set to drive trading sentiment. After navigating the first full trading week of 2026 with caution amid geopolitical tensions, investors will closely monitor multiple catalysts that could influence market direction.

Q3 Earnings Season Takes Center Stage

The third quarter earnings season will dominate market attention with 111 companies scheduled to announce their October-December results for FY26. Major blue-chip companies will be under investor spotlight as they report their financial performance.

Market participants will closely track revenue growth, profit margins, and key business trends across sectors. The earnings announcements come at a time when markets are seeking clarity on corporate performance amid global uncertainties.

CPI Inflation Data and Macro Indicators

India's retail inflation data for December 2025 will be released on January 12, post market hours, providing crucial insights into the country's price trends. Additionally, several other macroeconomic indicators will be monitored throughout the week.

Key Data Points to Watch:

• Monthly trade deficit figures
• Foreign exchange reserves
• Bond yield movements
• Rupee performance against the US dollar

These indicators will help investors assess the overall economic health and monetary policy implications.

Bharat Coking Coal IPO Debut

Bharat Coking Coal, a subsidiary of Coal India Limited, will make its stock exchange debut on January 16. The company's ₹1,300 crore initial public offering will close for subscription on January 13.

The allotment of shares to investors is scheduled tentatively for January 14, marking another significant addition to the Indian equity markets.

Global Trade and Tariff Developments

International trade dynamics will remain a key focus area, particularly developments related to India-US trade negotiations and Trump administration policies. The approval of a bipartisan Russian sanctions bill threatening tariffs up to 500% on major buyers of Russian oil has created uncertainty in global markets.

According to Vinod Nair, Head of Research at Geojit Investments Limited, "Looking ahead, clarity on global trade dynamics and Q3 earnings will shape market direction. Volatility is likely to persist in the near term, particularly in US exposed companies and sectors such as metals and oil & gas."

Recent Market Performance Context

Domestic equity benchmarks experienced their worst week in over three months, with both Nifty and Sensex declining over 2.50% during the week ended January 9. The Nifty closed at 25,683.30, down 193.55 points or 0.75%, while Sensex settled at 83,576.24, falling 604.72 points or 0.72%.

Market sentiment was affected by multiple factors including expectations of higher government borrowing, global headwinds from the Venezuela-US standoff, concerns over Russian oil imports, and China's restrictions on rare earth exports. Despite strong GST collections and healthy bank credit growth providing some support, continued foreign institutional investor outflows weighed on market performance.

The combination of domestic earnings results, macroeconomic data releases, new market listings, and global developments will likely determine the trajectory of Indian equity markets in the coming week.