Sensex, Nifty Crashed By 0.5-1% From Jan 20-24; What To Expect In Indian Stock Market Next Week?

Stock Market: In the trading week from January 20-24, Indian stock market closed its weekly on an intense bearish tone. Sensex and Nifty's weekly performance is down by 0.5% to nearly 1%. Realty stocks were the worst performers, while IT stocks recorded the most rally. In the next week, it is believed that Indian stocks consolidation phase is in the final stage, with resilience of large-cap stocks indicating a positive sign. Investors are guided to remain patient and adopt a accumulating strategy.

Sensex, Nifty:

On January 24th, Indian market halted its two-days winning streak to end in red. Sensex was down by 329.92 points or 0.43% to close at 76,190.46, while Nifty 50 slipped by 113.15 points or 0.50% to finish at 23,092.20 on Friday. During the week, the worst day for market was January 21st where Sensex and Nifty erased 76,000 mark and 23,000 mark with decline of nearly 2% each. However, market recovered massive losses of that day during bullish trend between January 22-23, but could not contain the gaining momentum.

That being said, the current trading week was volatile and the market closed in deep red. From January 20-24, the weekly performance of Sensex is lower by 592.15 points or 0.8%, while Nifty's weekly performance is down by 116.55 points or 0.50%. Sensex underperformed Nifty.

So far, in January month, FPIs have been net sellers of Indian equities, pulling out up to Rs 64,156 crore till January 24th. Due to selloffs in equities, overall in Indian market, FPIs outflow is about Rs 70,994 crore including selloff of Rs 4,399 crore in debt securities.

Also, Indian rupee stayed closer to its record low of 86.6 against the US dollar in the current month. However, in the current week, rupee gained mildly to end near 86.188 per dollar, as the greenback saw its worst weekly fall in 2 months by 1%.

Talking about the current weekly performance, Amol Athawale, VP-Technical Research, Kotak Securities said, in the last week, the benchmark indices continued to experience selling pressure at higher levels. The Nifty ended 0.49 percent lower, while the Sensex was down by 405 points. Among sectors, the IT index outperformed, rallied 3.57 percent, whereas the Real Estate index lost the most, shedding over 9 per cent.

Also, Vinod Nair, Head of Research, Geojit Financial Services said, the market concluded the week on a sombre note, with a sell-on-rally sentiment. Realty fared the worst, as investors turned cautious with diminishing chances of interest rate cuts and weak industry numbers. The PMI data also cast a shadow with a weaker imprint than expected. However, inline results from the IT sector and early signs of a revival in discretionary spending offer a glimmer of hope.

What To Expect In Indian Stock Market From January 27-31?

Nair believes uncertainty surrounding Trump's economic policies and high valuations may impact the stock market in the short term, especially in EMs. Broadly, Q3 results are in line with expectations but are not helping the market which is following the sell on news trend. Key events, such as the FOMC meeting and the Union Budget, will influence market sentiment. While the FOMC maintains a hawkish stance, Trump's push for rate cuts can add a positive undertone in the future. Expectations for the Union Budget remain subdued; however, the conclusion of this major event without any negative surprises could help alleviate market concerns.

He added the broader market remains under pressure, but the resilience of large-cap stocks is a positive sign. The Indian market has successfully navigated similar challenges in the past, from taper tantrums to geopolitical concerns. The current correction is driven by a combination of factors, including tapering, an earnings slowdown, elevated valuations, and trade uncertainties.

Meanwhile, Ajit Mishra - SVP, Research, Religare Broking said, the upcoming week holds significant importance, not just for the equity markets but for the economy as well, with the Union Budget scheduled for February 1 (Saturday) and a special trading session on that day for real-time reactions to policy announcements. Market participants are hopeful for measures aimed at boosting the slowing economy and driving consumption, all while maintaining fiscal discipline. Additionally, several major companies, including Tata Steel, Bajaj Auto, Maruti, Tata Motors, ONGC, Cipla, and IndusInd Bank, are set to release their earnings during the week.

On the global front, Mishra added, key events like the US FOMC meeting and statements from the US President will also influence market sentiment. Most expect no immediate action from the Fed, given the recent rise in inflation and the potential risks of further escalation.

From technical perspective, Mishra believes that the benchmarks remain vulnerable to further downside, with critical support in the 22,700-22,900 range for the Nifty. Any recovery will likely face strong resistance in the 23,450-23,650 zone. A notable concern is the disconnect between the benchmarks and the broader market, as selective buying in heavyweight stocks has cushioned the decline, while broader market stocks continue to face sharp corrections, eroding portfolio values.

Moreover, Athawale believes for the bulls, the levels of 23,350/77000 and 23,450/77300 will act as key resistance areas, while 23,000/75700 and 22,900/75500 could serve as key support zones for traders. If the market surpasses 23,450/77300, it could rally till 23,600-23,650/77800-78000. Conversely, if it falls below 22, 900, /75500 selling pressure may intensify, potentially slipping till 22800-22650/75200-74700

In case of Bank Nifty, Athawale said, as long as it is trading below 49,000, weak sentiment is likely to continue. On the downside, it could fall till 47,500-47,200. Conversely, if it rises above 49,000, it could bounce back to the 20-day Simple Moving Average (SMA) or 49,500. Further upside may also continue, which could lift the index up to 50,000.

Amid this correction, Mishra advised that "certain pockets are displaying resilience. Traders are advised to adopt a stock-specific approach and consider hedged positions, given the upcoming events and heightened uncertainty."

Expecting the consolidation phase to end soon, Nair said, " We believe the market is now in the final phase of consolidation. With the broad market having corrected by 14%, the downside appears limited, supported by strong long-term economic fundamentals. India's GDP growth is projected to increase from 6.4% in FY25 to 7.0% in FY26, if the earnings growth reverts to the long-term average of 15% in FY26, we can expect the market to move out of the negative trend. For long-term investors, this is an opportune time to remain patient and adopt an accumulation strategy."