The Indian stock market has started the year 2025 on a shaky note, with the equity benchmarks Sensex and Nifty reeling under selling pressure amid mixed earnings, disappointing macroeconomic data, and weak global cues. Market experts expect consolidation to persist in the near term due to uncertainties surrounding the newly appointed U.S. President Donald Trump's policies, a strengthening dollar index, sustained selling by foreign investors, and rising crude oil prices driven by supply concerns.

Last week, the BSE benchmark Sensex and Nifty50 registered a steep fall of 2.3% each, logging their biggest weekly loss in a month. Sentiment was dampened by a downward revision in India's GDP growth estimates, growing concerns over HMPV virus cases, and persistent selling by foreign institutional investors due to high valuations.

The 30-share Sensex lost 1,844 points, or 2.32%, during the week ending January 10, while the Nifty declined by 573 points, or 2.38%. The broader markets were hit the hardest, with the BSE midcap and smallcap indices losing over 5% each.

On the sectoral front, 12 of the 13 major indices ended in the red last week, with the IT sector being the only exception. Realty, energy, and metals emerged as the top laggards. The IT sector was the top performer, rising 1.9%, while realty lost the most ground, down 7.76%.

“All major indices are now trading below their crucial 200-day EMA, highlighting persistent bearish momentum. The sharp decline in the market is attributed to multiple factors, including sustained foreign investor outflows, subdued expectations for Q3 earnings, continued weakness in the Indian rupee against the U.S. dollar, and rising U.S. 10-year bond yields, which have driven FIIs towards the U.S. bond market,” says Puneet Singhania, Director at Master Trust Group.

Vinod Nair, Head of Research at Geojit Financial Services, said that the domestic market trudged through rough terrain this week, primarily due to the downward revision of India's GDP growth estimate to 6.4% for FY25, which cast a shadow over the economy's momentum. “Furthermore, Q3 corporate earnings projections remain modest, which is not helping investor sentiments. This, combined with persistent selling by FIIs due to high valuations, especially in broader markets and global headwinds, has weighed heavily on the markets,” he adds.

So the big question now arises: How would the coming week be? Here are the five key triggers for the market that one can watch out for:

CPI and WPI Inflation Data

The market will closely monitor macroeconomic data, including the CPI and WPI inflation figures, set to be released this week. The CPI data for December 2024 is scheduled for release on January 13, while the WPI data will be available on January 14. The headline inflation number is crucial for interest rate decisions, as the Reserve Bank of India (RBI) will review policy post-Union Budget in February.

India's retail inflation (CPI) eased to 5.48% in November, after crossing the RBI's upper tolerance band of 6% in October 2024, thanks to an influx of fresh farm produce that helped stabilise vegetable prices. Food inflation declined month-on-month, coming in at 9.04%, while core inflation remained steady at 3.7%.

Analysts at Emkay Global estimate December CPI at around 5.3-5.4%, driven by a continued drop in food prices during winter. Core inflation is expected to be 3.5% in FY25E, remaining below 4% in the coming months, while FY25E headline inflation is projected at 4.9%.

FII Flow

Last week, foreign institutional investors (FIIs) emerged as net sellers in the Indian equity market, offloading ₹16,854 crore in the cash segment. However, domestic institutional investors (DIIs) provided strong support to the market, with net inflows of ₹21,682 crore.

The continued sell-off by FIIs can be attributed to the sustained weakness of the Indian rupee against the U.S. dollar and rising U.S. 10-year bond yields, which have led them to shift towards the U.S. bond market, says Singhania of Master Trust Group. The rupee touched the critical 86-mark (provisional) against the dollar on Friday, amid a significant outflow of foreign funds.

Q3 Earnings

After IT bellwether Tata Consultancy Services, heavyweight Infosys, Wipro, and HCL Technologies are slated to release their December quarter earnings this week. Among other major players, Reliance Industries, HDFC Asset Management Company (AMC), HDFC Life Insurance Company, and Axis Bank will also unveil their results for Q3 FY25.

Global Cues

Investors will also keep an eye on global cues, as U.S. data on the labor market and inflation trends may impact markets globally. Additionally, any further rise in the dollar index and a rebound in crude oil prices could raise inflationary concerns. Brent crude ended the week with a 2.9% gain, at around $78.7 per barrel, while the 10-year G-Sec yield stood at 6.77% after losing 0.4 bps last week.

“On the global front, updates on the U.S. economy, particularly labour market data and inflation trends, may impact FII flows. A spike in crude oil prices will add inflationary pressure. Overall, market volatility is expected to remain as investors react to a mix of earnings, macroeconomic data, and global cues," says Vinod Nair of Geojit Financial Services.

Technical View

The technical chart shows that 34% of Nifty 50 stocks are above the 200-day moving average (MA), which has deteriorated from the prior two weeks' average of 40%. India VIX, a key indicator of market volatility, climbed 4.2% to 14.92 last week, reflecting rising apprehension among traders. However, with the VIX consistently remaining below the critical 15 threshold, market sentiment continues to be cautiously optimistic despite restrained buying interest, according to SAMCO Securities in a note.

Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities, in his technical outlook, says that the Nifty's current price action hints at a sideways movement amid continued bearish pressure and failure to hold its recovery attempts above 23,500. “A decisive break above 23,700 could trigger short-covering, potentially driving the index to 24,000. On the flip side, a sustained dip below 23,270 would expose the index to further declines toward 23,000. Until the index breaches resistance levels, the broader trend remains bearish, favouring a 'sell-on-rise' strategy as buyers struggle to sustain gains at elevated levels,” he explains.

“The bearish pressure continues to intensify as the Nifty closed below 23,500 for the first time in several days. The index remains below the crucial 50 EMA, reaffirming a bearish trend. Furthermore, the RSI remains in a negative crossover, signaling weak momentum. Sentiment stays subdued in the short term, with the potential for a decline toward 23,300 or 23,000. On the upside, resistance is observed at 23,550–23,600,” says Rupak De, Senior Technical Analyst at LKP Securities.