CHENNAI: Indian equity markets went through a volatile but largely range-bound phase during the week of January 12 to 16, 2026, as investors balanced strong pockets of corporate earnings against persistent global uncertainties and continued foreign fund outflows. The benchmark indices struggled to establish a clear direction, oscillating between gains and losses through the week, before ending with marginal changes that underlined the cautious mood prevailing on Dalal Street.
Trading at the start of the week was tentative, with investors unwilling to take aggressive positions amid mixed global cues and lingering concerns over global growth, interest rate trajectories in the US, and geopolitical tensions. Early gains in select heavyweight stocks were frequently offset by selling pressure elsewhere, leading to choppy intraday movements. As the week progressed, volatility increased, particularly in mid-week sessions, when profit-taking emerged after recent rallies and foreign institutional investors continued to pare exposure to Indian equities. This selling pressure pushed benchmarks lower on certain days, testing key support levels before domestic buying stepped in to stabilise the market.
Corporate earnings played a decisive role in shaping sentiment during the latter half of the week. Strong quarterly results and management commentary from leading information technology companies helped revive buying interest in the IT space, lending crucial support to the headline indices. The IT sector emerged as one of the key outperformers, benefiting from optimism around deal pipelines, margin stability and improved visibility on global demand. This earnings-driven support helped markets recover from mid-week weakness and close the week on a steadier footing.
Analysts' take
"The markets showed early signs of recovery after a multi-session decline, led by strong performances in select IT and banking stocks following positive earnings surprises. The rebound highlighted underlying resilience in domestic financials even as global uncertainties continued to linger," says R Ponmudi, CEO at brokerage Enrich Money.
He added that the recovery was largely driven by heavyweight IT stocks after upbeat quarterly updates, helping the market absorb persistent concerns around US tariff threats, including potential secondary duties linked to trade with Russia and Iran.
"While tariff-related overhangs remain, their impact has been contained so far. Continued domestic institutional inflows have provided a stabilising cushion against moderate FII outflows. Export-oriented sectors remain cautious, but resilient domestic consumption, steady services growth, and diversification in trade partners continue to support the broader economic outlook. From a broader perspective, the recent pullback appears to be a healthy correction within the larger uptrend, with key indices respecting higher-timeframe supports. Improving earnings momentum and sustained DII participation continue to limit downside risk, even as global headwinds and US policy uncertainties may cap aggressive upside in the near term," Ponmudi said.
While the benchmark indices remained largely flat on a weekly basis, the broader market displayed relatively better resilience. Mid-cap and small-cap stocks saw selective buying, supported by stock-specific triggers and improved risk appetite among domestic investors. However, the broader gains were uneven, with investors remaining selective and avoiding excessive exposure to high-valuation pockets. Sectorally, PSU banks and metal stocks attracted interest, aided by expectations of stable asset quality, better earnings visibility and supportive global commodity trends. In contrast, sectors such as consumer durables, real estate, pharmaceuticals and automobiles faced intermittent selling pressure, either due to profit-booking or concerns over demand outlook and margin pressures.
Foreign institutional investor activity continued to be a key overhang for the market throughout the week. Sustained FII selling limited the upside and prevented a decisive breakout, even on days when domestic cues were supportive. Domestic institutional investors and retail participants, however, provided a counterbalance, absorbing part of the selling and helping the market hold crucial levels. The interplay between foreign outflows and domestic inflows remained a defining feature of market behaviour.
Global trend
On the global front, uncertainty around US trade negotiations and the continued 50% tariff on Indian imports remain a headwind for sentiment.
"However, attention is shifting to the India–EU trade agreement, which is expected to be concluded later this month and could act as a meaningful catalyst for improved investor confidence. Meanwhile, US–Iran rhetoric continues to act as a short-term driver of global market sentiment, influencing oil prices and cross-asset positioning. While recent de-escalation comments have capped some of the upside in crude, rapidly changing headlines are keeping investors cautious and tactically positioned, with energy and safe-haven assets likely to lead any risk-on or risk-off moves," says this investment advisor.
Outlook
The near-term outlook remains guarded, with markets expected to be driven by earnings outcomes, global trade signals and geopolitical developments, favouring selective, stock-specific opportunities over broad directional bets.
Overall, the week reflected a consolidation phase for Indian equities after recent gains, marked by heightened volatility but underlying resilience. Investors appeared to be positioning cautiously ahead of key macro triggers, including upcoming economic data releases and the approaching Union Budget, while closely tracking corporate earnings for cues on growth and profitability trends. The ability of the market to defend support levels despite global headwinds suggested underlying strength, even as the absence of strong follow-through buying pointed to continued range-bound movement in the near term.