The benchmark indices continued their downtrend for the second consecutive week, ending January 17 with a nearly 1% decline. The BSE Sensex dropped by 760 points, closing at 76,619, while the Nifty 50 lost 228 points to finish at 23,203. The negative market sentiment was primarily driven by rising uncertainty surrounding policy decisions from US President-elect Donald Trump, who is set to take office next week. Other factors contributing to the downturn included mixed Q3 earnings reports, persistent FII (Foreign Institutional Investor) outflows, and rising oil prices, all of which weighed heavily on market sentiment. The broader markets, however, outperformed the frontline indices, with the Nifty Midcap 100 and Smallcap 100 indices ending flat but with a positive bias.
Looking ahead, the market is expected to remain consolidative, with heightened volatility likely due to ongoing corporate earnings reports and the focus on Trump’s policy announcements. Vinod Nair, Head of Research at Geojit Financial Services, noted that the market would likely remain cautious in the short term due to moderate Q3 earnings expectations and continued FII outflows, which could contribute to higher volatility. Investors will also be closely monitoring Trump’s policy decisions, particularly on tariffs, as well as inflation data and policy moves from the Bank of Japan.
One of the key factors to watch next week will be corporate earnings. While Reliance Industries reported healthy growth, Q3 results so far have been mixed. IT giants have shown cautious commentary, and Axis Bank’s numbers were lower than expected. Around 245 companies are scheduled to announce their results in the coming week, including major companies like HDFC Bank, Hindustan Unilever, Dr Reddy’s Laboratories, ICICI Bank, and JSW Steel. These earnings will play a crucial role in shaping market sentiment in the short term.
The policy announcements from Donald Trump after his inauguration on January 20 will also be a significant factor influencing the market. Experts are particularly concerned about the potential impact of widespread tariffs on global trade. Protectionist measures could lead to retaliatory tariffs, higher costs for businesses, and reduced consumer spending. Economies with strong export dependencies could experience significant slowdowns. The US Dollar index (DXY) and US bond yields will be key indicators to watch as they respond to Trump’s policies.
Foreign Institutional Investor (FII) activity will remain under the spotlight, especially considering the substantial selling seen in the previous year. FII outflows have continued into 2025, with net sales of more than Rs 25,000 crore last week alone. Domestic institutional investors have provided some support by buying Rs 49,367 crore in shares, nearly offsetting the FII sales. The persistent outflows from FIIs could continue to add pressure on the markets, although the DII support has helped to cushion some of the impact.
Rising crude oil prices are another important factor to watch, especially for oil-importing nations like India. Brent Crude prices climbed for the fourth consecutive week, rising by 1.29% to close at $80.79 per barrel, the highest since July 2024. Concerns about tighter sanctions on Russia, the possibility of stricter sanctions on Iran, and stronger-than-expected economic growth in China have all contributed to the rise in oil prices. Higher oil prices could further strain the Indian economy, which is heavily reliant on oil imports.
On the global front, attention will also be on economic data, including the Bank of Japan’s interest rate decision and inflation numbers. Additionally, January’s manufacturing and services flash PMI data from major economies like the US, UK, and Japan will provide more insights into global economic health. These data points could significantly impact investor sentiment in the coming week.
Domestically, the Indian market will be closely watching the HSBC Manufacturing & Services PMI flash numbers for January, due on January 24. This data, along with the foreign exchange reserves figures for the week ending January 17, will give investors a clearer picture of India’s economic performance. Forex reserves have been steadily declining since September, and the Rupee has weakened against the Dollar, reaching an all-time low of 86.69 last week. These developments may continue to influence market sentiment, particularly with the ongoing pressure on the Indian currency.
Despite the challenging conditions in the secondary markets, the primary market remains active. Five IPOs are scheduled to open next week, including Denta Water and Infra Solutions, a Rs 220 crore issue from the mainboard segment, and four from the SME segment. Investors will also be looking out for the listings of Laxmi Dental and Stallion India Fluorochemicals, both of which will debut on the stock exchanges in the coming week.
Technically, the Nifty 50 remains weak, trading below all key moving averages and showing a negative bias. The index formed a Doji candlestick pattern on the weekly charts, indicating indecision among market participants. Consolidation is expected to continue, with 23,050 acting as a key support level. A decisive fall below this level could trigger further selling, pushing the index towards 22,800. On the upside, the immediate resistance level is at 23,400, with further resistance at 23,700-23,900 levels.
In conclusion, the market is likely to remain cautious in the coming week, driven by global uncertainties, corporate earnings, and rising oil prices. The focus will be on Trump’s policy announcements, FII flows, and the impact of key economic data from both global and domestic sources. Investors will need to remain vigilant and closely monitor these factors as they navigate the markets in the short term.