The Indian stock market ended its third consecutive week in the red as persistent foreign institutional investor (FII) selling and global uncertainties weighed on sentiment. The benchmark indices reflected bearish trends, with the Nifty 50 falling 111 points (0.5%) to close at 23,092, and the BSE Sensex dropping 429 points (0.56%) to settle at 76,190 for the week ending January 24. Broader markets faced sharper declines, as the Nifty Midcap 100 and Smallcap 100 indices fell 2.5% and 4%, respectively.
Vinod Nair, Head of Research at Geojit Financial Services, stated that the market appears to be in the final phase of consolidation. He highlighted that broader market corrections of 14% suggest limited downside, backed by India’s strong long-term economic fundamentals.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, noted that domestic equities could trade within a broad range amid ongoing volatility. He pointed to quarterly earnings, evolving U.S. economic policies, and the Union Budget as key market drivers.
A Long Week of Events on the Horizon
The upcoming trading week (January 27-February 1) is packed with significant events. Investors will closely watch the Union Budget 2025, the Federal Open Market Committee (FOMC) meeting, quarterly corporate earnings, U.S. GDP numbers, and the European Central Bank (ECB) meeting. Analysts expect the market to consolidate further, influenced by these developments.
The Union Budget will take center stage on February 1, a Saturday, making it a long trading week for Dalal Street.
Key Factors to Watch Next Week
Union Budget 2025
All eyes remain on Finance Minister Nirmala Sitharaman’s Budget announcement amid weakening domestic demand, a depreciating rupee, and tariff threats from Donald Trump’s administration. Experts anticipate a balanced approach focused on boosting consumption and supporting economic growth while maintaining fiscal prudence.
Nomura expects fiscal deficit estimates to range between 4.7% and 4.8% of GDP for FY25, down from the previous forecast of 4.9%. Key focus areas likely include increased capital expenditure, agriculture investment, and modest adjustments in subsidies. Market participants will also watch for potential tweaks in tax slabs and customs duties to address the trade environment under Trump’s second term.
Stocks linked to PSU and capital expenditure themes, such as defense, railways, and capital goods, are likely to remain in focus.
Corporate Earnings
The quarterly earnings season will reach its peak with over 500 companies announcing results, including marquee names such as Tata Steel, Bajaj Auto, Cipla, Maruti Suzuki, Tata Motors, and Larsen & Toubro. Investors will also track updates from Adani Enterprises, Coal India, and Sun Pharmaceuticals, along with a host of financial companies like Bajaj Finance and Bajaj Finserv.
Beyond the Nifty 50, firms like GAIL India, BHEL, Biocon, and Voltas will release their earnings. Analysts believe these results could significantly impact stock-specific movements.
Domestic Economic Data
India’s fiscal deficit data for December and infrastructure output numbers will be released on January 31. Updates on bank loan and deposit growth for the fortnight ending January 17, along with foreign exchange reserves for the week ending January 24, will also draw attention. India’s forex reserves, which have been declining since September 2024, now stand at $623.983 billion.
Global Factors
The FOMC meeting on January 28-29 remains a critical event, with most economists predicting no change in interest rates. However, U.S. President Donald Trump’s remarks at the World Economic Forum urging immediate rate cuts have raised concerns. Fed Chair Jerome Powell previously signaled only two rate cuts for 2025, keeping market participants cautious.
In addition, U.S. GDP data for Q4 2024, along with employment and consumer spending figures, will influence global sentiment. The ECB meeting and potential interest rate decisions by the Bank of Japan will also weigh on investor outlooks.
FII Activity
Foreign institutional investors net sold ₹22,500 crore worth of shares last week, bringing their total selling in January to ₹69,080 crore. Domestic institutional investors compensated with net buying worth ₹66,945 crore. Analysts believe that continued FII outflows, despite falling U.S. bond yields and a weaker dollar index, remain a headwind for Indian equities.
IPO Activity
The primary market will see activity next week with Dr. Agarwal’s Health Care launching its ₹3,027 crore IPO on January 29. Additionally, Malpani Pipes and Fittings will open its IPO in the SME segment, while several newly listed firms, including Denta Water and Rexpro Enterprises, will start trading.
Technical Overview
The Nifty 50 continued to trade within the 23,000-23,400 range, forming a bearish candlestick pattern. Experts suggest immediate support lies at 23,000, with further downside possible if breached. Resistance levels remain near 23,400, and a breakout could drive the index toward 23,600-24,000 levels.
The volatility index (India VIX) rose 6.33% last week to 16.75, its highest level since June 2024, signaling continued caution among investors.
Conclusion
The coming week will test the resilience of Indian equities as markets navigate domestic and global developments. With the Union Budget, FOMC meeting, and earnings season in full swing, investors should brace for heightened volatility and adopt a selective approach. Careful monitoring of key events and technical levels will remain crucial for navigating this eventful week.
Also Read: How to Identify Undervalued Stocks Using Fundamental Analysis
