Sensex, Nifty fall sharply; foreign selling and global cues weigh

Indian equities extended their decline on January 20 as weak global cues, relentless foreign fund outflows, mixed earnings, and rising geopolitical tensions pushed the Sensex down nearly 400 points and dragged the Nifty below the crucial 25,500 level.

Domestic equity benchmarks Sensex and Nifty continued their downward trajectory on Tuesday, weighed down by persistent foreign institutional investor (FII) selling, mixed corporate earnings, and escalating global trade and geopolitical concerns.

Around 11 am, the Sensex was trading 388.54 points, or 0.47 percent lower, at 82,857.64, while the Nifty slipped 133.75 points, or 0.52 percent, to 25,451.75. Market breadth remained firmly negative, with declining stocks far outnumbering advancing ones.

Heavyweights such as Bajaj Finance, Bajaj Finserv and Eternal led losses on the Nifty, falling up to 2 percent. In contrast, NTPC and Hindustan Unilever offered limited support, gaining up to 1 percent. Broader markets mirrored the weakness, as mid- and small-cap stocks also saw selling pressure.

Key Factors Behind the Market Decline

1) Trade-war concerns:

Renewed uncertainty over US tariff policies, particularly tensions between the US and Europe, dented global risk appetite. Rising US Treasury yields and fears of further escalation weighed on equities worldwide, impacting Indian markets as well.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said markets are likely to remain volatile until clarity emerges on trade-related geopolitical issues.

2) Persistent FII selling:

Foreign investors continued to offload Indian equities. FIIs sold shares worth ₹3,262.82 crore on Monday, marking the tenth session of net outflows this month, barring a marginal inflow on January 2. Sustained selling has capped any meaningful recovery in frontline indices.

3) Mixed Q3 earnings:

Corporate earnings provided limited comfort. Wipro shares fell sharply after the IT major delivered weak near-term guidance, dragging the IT index down 1.1 percent and making it the worst-performing sector of the day.

4) Weak global cues:

Asian markets traded mixed, with losses in Japan, China and Hong Kong outweighing gains in South Korea. US markets were shut on Monday for a holiday, but Wall Street futures slipped over 1 percent amid fresh tariff threats from President Donald Trump.

5) Rising volatility:

The India VIX, a gauge of market volatility, jumped over 4 percent to 12.34, signalling growing nervousness among investors.

6) Rupee weakness:

The rupee weakened by 8 paise to 90.98 against the US dollar, pressured by strong dollar demand from importers and continued foreign fund outflows, adding to negative sentiment.

7) Uncertainty over US court ruling:

Investors remain cautious ahead of a potential US Supreme Court decision on Trump-era tariffs. Any adverse ruling could significantly impact global trade dynamics and market sentiment.

8) Rising crude prices:

Brent crude inched up 0.11 percent to $64.01 per barrel. Higher oil prices tend to stoke inflation concerns and strain India’s fiscal outlook.

9) Nifty weekly expiry:

Tuesday’s Nifty weekly derivatives expiry also contributed to intraday volatility, as traders unwound and rolled over positions, leading to sharp index swings.

10) Technical Outlook

Anand James, Chief Market Strategist at Geojit Investments, noted that while the Nifty has managed to move back above its lower Bollinger Band after taking support near recent lows, failure to sustain above 25,550 could limit any near-term upside.