Indian shares fell to their lowest levels in more than three months on Tuesday, as a broad-based sell-off driven by weak corporate earnings, global trade concerns and sustained foreign fund outflows rattled investor confidence.
The benchmark Nifty 50 slipped 1.38% to close at 25,232.5, while the BSE Sensex declined 1.28% to 82,180.47, both marking their weakest closing levels in over three months.
The sell-off was accompanied by a sharp spike in volatility, with the India VIX jumping nearly 8%, signalling expectations of continued market turbulence in the near term.
Broad-based sell-off hits large and small caps
The decline was not limited to frontline indices.
Broader markets bore the brunt of the selling, with small-cap and mid-cap indices tumbling 2.9% and 2.6% respectively.
The small-cap index closed at its lowest level in eight months, while mid-caps slipped to a three-month low, reflecting growing risk aversion among investors.
Market breadth turned decisively negative, with all 16 major sectoral indices ending in the red.
Only 28 stocks in the Nifty 500 managed to close higher, underlining the intensity of the sell-off.
“Valuations are being reset,” said Dharmesh Kant, head of equity research at Chola Securities.
He noted that while a few companies stood out, most Nifty 50 firms reporting December-quarter earnings had fallen short of expectations.
IT and heavyweight stocks drag indices lower
Information technology stocks led the losses, with the IT index sliding 2.1% to become the worst-performing sector of the day.
Analysts said margins across the sector have come under pressure following the implementation of new labour codes, denting profitability.
LTIMindtree plunged 6.7% after reporting a decline in quarterly profit, while Wipro fell 2.5%, extending losses from the previous session on a weak fourth-quarter outlook.
Heavyweight stocks also weighed on the benchmarks.
Reliance Industries dropped 1.4%, extending Monday’s decline after the company posted third-quarter earnings below market expectations.
ICICI Bank, another index major, also disappointed investors with weaker-than-expected results.
Global trade worries and foreign selling deepen gloom; budget adds to jitters
Sentiment remained fragile amid global uncertainties, particularly after US President Donald Trump threatened additional tariffs on eight European Union members, reviving fears of a wider trade confrontation.
At home, continued selling by foreign institutional investors added to the pressure.
Overseas investors have sold Indian equities worth around $3 billion so far in January, marking the heaviest monthly outflows since August.
The Nifty 50 has ended lower in nine of the 13 trading sessions this month.
Market participants are also cautious ahead of the federal budget on February 1, with high expectations that the government will announce measures to boost economic growth, job creation and consumer demand.
While policymakers are expected to strike a balance between growth and fiscal discipline, concerns that tighter fiscal consolidation could curb capital expenditure have unsettled investors.
“Continued selling by foreign investors and the absence of a broad-based rally ahead of the Union Budget have kept investors on edge,” said Aamar Deo Singh, senior vice president at Angel One.
Near term volatility to continue; analysts assess technical levels
Analysts say volatility in the market is likely to continue in the near-term.
“The volatility in the market is likely to continue in the near-term till some clarity emerges regarding the US-Europe standoff on Greenland tariffs. Since both sides have hardened their positions, the uncertainty will continue for some time,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Technical analysts warned that the near-term outlook remains weak unless key resistance levels are reclaimed.
According to Sudeep Shah, head of technical and derivatives research at SBI Securities, the 25,370–25,400 zone now acts as a critical resistance area for the Nifty.
“As long as the index trades below 25,400, broader sentiment is likely to remain weak,” Shah said.
He added that a failure to hold support around 25,080 could push the index towards 24,900 in the short term.
Rupak De, senior technical analyst at LKP Securities, said bears had regained control amid ongoing transatlantic trade tensions.
Indicators remain in bearish territory and are nearing oversold levels, with the index drifting towards its 200-day moving average.
Immediate support is seen around 25,100–25,150, where a short-term pullback could emerge if the level holds.
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