Indian stock markets experienced a sharp sell-off last week as benchmark indices Nifty 50 and BSE Sensex declined over 2%, weighed down by global uncertainties, persistent foreign outflows, and rising US bond yields. The negative sentiment dampened investor confidence, sparking a cautious outlook for the weeks ahead.
FII Outflows and Rising US Bond Yields Pressure Markets
Foreign Institutional Investors (FIIs) pulled out a substantial $2.2 billion from Indian markets in January, driven by a strengthening US dollar and rising US bond yields. These outflows, coupled with muted expectations for Q3 corporate earnings, added to the bearish sentiment across Dalal Street.
The downward revision of India’s GDP growth estimates to 6.4% for FY25 further impacted market momentum. Analysts noted that high valuations in broader markets have made equities less attractive amid global headwinds.
IT Sector Shines Amid Market Weakness
While most sectors struggled, the IT sector stood out as a beacon of hope for investors. The Nifty IT index gained 2% last week, supported by strong performance from Tata Consultancy Services (TCS).
TCS shares surged 5.6% on Friday after the company expressed optimism about a demand revival in North America. Analysts believe the IT sector could maintain its positive trajectory, driven by TCS’s robust Q3 results and improving demand trends.
Expert Insights on Market Outlook
Vinod Nair, Head of Research at Geojit Financial Services, highlighted the key challenges weighing on the market, including global economic uncertainty and FII selling pressures.
- Earnings and Data Focus: Investors are expected to closely monitor Q3 corporate earnings, with major companies, particularly IT giants, set to release their results.
- Macroeconomic Indicators: India’s inflation rate and industrial production data will be critical in shaping market sentiment, along with global updates on the US labor market and inflation trends.
- Crude Oil Prices: Any spike in crude oil prices could increase inflationary pressures, further impacting market stability.
Volatility Expected to Persist
Friday’s trading session ended on a volatile note as global headwinds and FII outflows continued to weigh on markets. While the IT sector offers a silver lining, broader market trends are likely to be influenced by macroeconomic data, corporate earnings, and global developments in the coming weeks.