Dalal Street looked set for a volatile start to the last trading week of January. The BSE Sensex rang the opening bell near 81,650, rallying more than 100 points, while the NSE Nifty started trading today a little over 25,100, jumping over 60 points, as of 9:15 AM. However, within seconds, Sensex took a nosedive and slipped near 81,400, and the Nifty stood nearly flat.
In the pre-open session, the Sensex climbed close to 350 points and neared 81,900 and the Nifty crossed 25,100, around 9:04 AM. Notably, the equity markets are heading into Tuesday’s session under sustained pressure, with benchmark indices Sensex and Nifty down more than 4 per cent so far this month amid persistent foreign fund outflows, a weakening rupee, subdued corporate earnings and renewed global trade and geopolitical concerns.
The Sensex has fallen 3,682.90 points, or 4.32 per cent, in January, while the Nifty has declined 1,080.95 points, or 4.13 per cent, over the same period. Market participants noted that January has often been a volatile month in the run-up to the Union Budget. “Historically, similar pre-Budget trends in January have witnessed a sharp fall followed by a recovery post-Republic Day leading up to the Budget. Markets will be hoping for a similar reversal this time,” said Santosh Meena, Head of Research at Swastika Investmart Ltd.
A look at recent history shows that January has delivered negative returns in several years. In January 2025, the Sensex had declined 638.44 points, or 0.81 per cent. Prior to that, the benchmark also ended lower in January 2024, 2023, 2022, 2021 and 2020.
Foreign selling and weak rupee
So far in January 2026, both benchmark indices have slipped more than 4 per cent, with geopolitical uncertainties and fresh tariff worries exerting a cascading impact on domestic equities.
The global risk-off environment has triggered aggressive selling by foreign portfolio investors during the month, adding further strain on the rupee, which has fallen to record lows.
“This has added pressure on the rupee, which has slipped to record lows,” said Ponmudi R, CEO of Enrich Money, an online trading and wealth tech firm. The local currency touched a historic low of 92 against the US dollar on January 23 and has weakened by more than 2 per cent so far this month.
Ponmudi added that elevated crude oil prices and rising global bond yields have deepened risk aversion. “Elevated crude oil prices in international markets, alongside rising global bond yields, have further compounded risk aversion, keeping investors cautious and reinforcing a defensive stance as markets navigate an increasingly uncertain global macro and geopolitical landscape,” he said.
Earnings disappointments weigh on sentiment
Apart from global headwinds, domestic factors have also weighed heavily on investor confidence. Earnings disappointments from select heavyweight stocks across sectors, including IT, banking and consumption-linked segments, have dampened optimism and contributed to a weak start to the year, according to analysts.
Last week alone, the Sensex fell 2,032.65 points, or 2.43 per cent, while the Nifty declined 645.70 points, or 2.51 per cent.
“The decline in domestic equities can be attributed to a combination of persistent global and domestic headwinds,” said Ravi Singh, Chief Research Officer at Master Capital Services Ltd. On the domestic front, he said, underwhelming and cautious Q3 earnings commentary from several corporates emerged as a key trigger, weighing heavily on market confidence.
Globally, renewed trade concerns between the US and major economies, particularly Europe, have added to uncertainty. Singh also pointed to escalating geopolitical tensions in the Middle East, especially recent developments involving the US and Iran, as factors that have kept global markets on edge.
Budget expectations in focus
With the Union Budget 2026–27 just days away, attention is also turning to fiscal policy signals. According to a report by Axis Securities, the Budget is expected to strike a balance between supporting growth and maintaining macroeconomic stability.
“With global uncertainty, domestic growth resilience and fiscal discipline all in play, the Union Budget 2026–27 is expected to strike a balance between growth support and macro stability,” the report said, adding that markets are likely to favour a Budget that sustains growth without compromising medium-term fiscal consolidation.
Analysts said geopolitical developments could influence opening moves in the near term, but earnings and domestic macro conditions will determine whether any recovery can be sustained.
“Over the short term, geopolitical developments may influence opening moves, but earnings and domestic macro conditions will determine follow-through,” said Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said Foreign Portfolio Investors not only continued their selling spree in the week ended January 23 but also increased the pace of selling.
“Sentiments remained very weak due to a combination of factors such as sustained rupee depreciation, lack of any finality regarding the US–India trade deal and unimpressive Q3 results so far, which are not indicating any pick-up in corporate earnings,” Vijayakumar said.
