Sensex, Nifty tank over 4% so far this month on unabated foreign fund outflows, geopolitical risks

New Delhi: India's benchmark indices Sensex and Nifty have fallen over 4 per cent this month, weighed down by persistent foreign fund outflows, a weaker rupee, muted corporate earnings, geopolitical risks and fresh tariff concerns.

The 30-share BSE Sensex tumbled 3,682.9 points, or 4.32 per cent, and the 50-share NSE Nifty tanked 1,080.95 points, or 4.13 per cent, so far this month.

"Historically, similar pre-budget trends in January have witnessed a sharp fall followed by a recovery post-Republic Day leading up to the Budget; market participants will be hoping for a similar reversal this time," Santosh Meena, Head of Research at Swastika Investmart Ltd, said.

In January 2025 also, the 30-share BSE benchmark had declined 638.44 points, or 0.81 per cent. Prior to that in January 2024, 2023, 2022, 2021, and 2020 also, the BSE benchmark had declined.

"So far in January 2026, both the Sensex and the Nifty have declined by over 4 per cent, with geopolitical uncertainties and fresh tariff concerns exerting a cascading impact on domestic equities. The global risk-off environment has prompted aggressive selling by foreign portfolio investors during the month. This has added pressure on the rupee, which has slipped to record lows," Ponmudi R, CEO - Enrich Money, an online trading and wealth tech firm, said.

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 from select heavyweight stocks across sectors, including IT, banking, and consumption-linked segments, have further dampened investor optimism, leading to a disappointing start to the year," Ponmudi added.

The rupee hit a historic low of 92 against the US dollar on January 23. The local currency has slumped over 2 per cent so far this month.

According to a report by Axis Securities, 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.

"Markets are likely to favour a Budget that sustains growth without compromising medium-term fiscal consolidation," it added.

Last week, the BSE benchmark tanked 2,032.65 points, or 2.43 per cent, and the Nifty declined 645.7 points, or 2.51 per cent.

"The decline in domestic equities can be attributed to a combination of persistent global and domestic headwinds. On the domestic front, 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, further added to uncertainty. Adding to the risk-off sentiment, escalating geopolitical tensions in the Middle East, especially the recent developments involving the US and Iran, kept global markets on edge," Ravi Singh, Chief Research Officer from Master Capital Services Ltd, said.

Sudeep Shah, Head, Technical & Derivatives Research at SBI Securities, said, over the short term, geopolitical developments may influence opening moves, but earnings and domestic macro conditions will determine follow-through.

VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said, Foreign Portfolio Investors (FPIs) not only continued their selling spree in the week ended January 23, but also increased the intensity of their selling.

"Sentiments remained very weak due to a combination of factors such as sustained rupee depreciation, lack of any finality regarding US-India trade deal and unimpressive Q3 results, so far, which are not indicating any pick up in corporate earnings," he added.