Indian equity markets witnessed a brutal sell-off last week, recording their worst performance globally, as a combination of US-driven geopolitical shocks and trade anxieties sent investors into a risk-averse frenzy. The benchmark indices logged steep declines, casting a shadow over the beginning of the new year and the upcoming corporate earnings season.
The Triple Shock That Rattled Dalal Street
The week's turmoil was primarily fueled by three significant developments originating from the United States. Sentiment took the first hit when US Commerce Secretary Howard Lutnick indicated a potential delay in the crucial India-US trade agreement. This was followed by heightened anxiety as the proposed Sanctioning Russia Act of 2025, which could impose tariffs as high as 500% on nations purchasing Russian oil, progressed in the US Congress. Given India's energy imports, this legislation poses a direct threat to the country's economic growth and market stability.
Further compounding the global uncertainty was the US military's capture of Venezuelan President Nicolás Maduro, an event that triggered a broad-based retreat across sectors earlier in the week. "Holiday-thinned liquidity and lingering valuation concerns accelerated profit-booking and deepened the sell-off," explained Akhil Bharadwaj, Senior Partner at Alpha Capital.
A Week of Steep Declines and Sectoral Carnage
The cumulative impact of these shocks was severe. The Nifty 50 index plummeted 2.5% to close at 25,683.30 on Friday, marking its most significant weekly drop since 26 September 2025. The index consistently lost ground across all five trading sessions, slipping below the crucial psychological level of 26,000.
The pain was widespread but unevenly distributed. The oil and gas sector was the hardest hit, nosediving 5.4% as tariff fears gripped investors. Reliance Industries alone saw a 7.4% drop, wiping out nearly $15 billion from its market capitalization. The power and capital goods sectors followed, declining 4.4% and 2.5%, respectively.
In a stark contrast, consumer durables emerged as the sole major gainer, rising 2.4% during the week. Bharadwaj attributed this resilience to spillover festive demand and optimistic third-quarter expectations for companies like Havells and Polycab.
Earnings Season and Data: The Next Triggers for Markets
With the dismal week behind them, investor focus now shifts to the December-quarter earnings season, which begins in earnest. IT giants Tata Consultancy Services and HCL Technologies are set to report their numbers on Monday, followed by nearly 40 other Nifty 500 companies. The performance of bellwethers like Infosys, Wipro, and Reliance Industries will be critical in setting the tone for the broader market.
"For TCS and HCLTech, the Street expects 1-3% sequential constant-currency growth as BFSI and hi-tech deals ramp up, but margins may contract 30-40 bps on furloughs," Bharadwaj noted. Positive surprises from these reports could help rebuild the damaged market sentiment.
Investors will also closely monitor key data releases and events for direction, including:
- India's December retail inflation data, due on Monday.
- A pivotal US Supreme Court ruling on American tariffs.
The 30-share Sensex index's nearly 2% fall in the first seven trading sessions of 2026 represents its worst annual start in a decade, a sharp reversal from the marginal 0.7% decline seen in the comparable period last year. As global and domestic cues intertwine, the market's recovery hinges on calming external storms and a robust showing from corporate India's quarterly report card.
