The Indian stock market witnessed sharp correction in early trade on Monday, with equity benchmarks Sensex and Nifty slipping up to 1% as mixed corporate earnings and sustained selling by foreign investors dented investor sentiment. The broader markets were worst hit, with the BSE midcap and smallcap indices crashing up to 4%.

Undermining firm cues from global peers, the BSE Sensex opened 490 points, or 0.6%, lower at 75,700, and the NSE Nifty lost 152 points, or 0,65%, to bell the day at 22,940 level. Extending opening losses, the 30-share Sensex declined as much as 842 points, or 1.1% to hit a low of 75,348, while the Nifty50 fell 265 points, 1.14%, to touch a low of 22,827 in the trade so far.

The broader market witnessed sharp selling, with the BSE midcap index sliding 2.6%, and the smallcap index plunging over 4% amid valuation concerns.

In the Sensex pack, 26 out of 30 shares were flashing in red, with PowerGrid, HCL Tech, Zomato, Tech Mahindra, and Tata Motors falling in the range of 2-4%. On the other hand, Hindustan Unilever Ltd, ICICI Bank, State Bank of India, and Asian Paint were only gainers, rising up to 2%.

Reliance Industries and Tata Consultancy Services, the country’s most valued stocks, dropped over 2%, while Infosys and HDFC Bank also slipped nearly 2%.

On the global front, Asian market witnessed positive trading, barring Japan, while U.S. futures tumbled up to 2% after Chinese startup DeepSeek's launch of a free, open-source artificial intelligence model to rival OpenAI's ChatGPT. Japan's Nikkei dropped 0.5%, while China’s Shanghai Composite rose marginally by 0.1%, and Hong Kong's Hang Seng surged 0.8%.

On Friday, U.S. markets ended lower as investors booked profit ahead of the Federal Reserve policy meeting, while digesting a mixed bag of economic data and earnings reports. The Dow Jones Industrial Average lost 0.32%, the S&P 500 dropped 0.29%, and the Nasdaq Composite settled 0.50% lower.

Will bears continue to rule D-Street?

This 6-day week is likely to be highly volatile with major events like the Union Budget, Economic Survey data, ongoing earnings season, U.S. Federal Reserve policy announcement will set tone for the market. Adding to it, January derivative contracts expiry, foreign fund outflows, crude oil prices, and rupee movement will also impact domestic market.

“The market is looking forward to fiscal stimulus through income tax cuts in the Budget. If the expectations are met, there can be a relief rally in the market. But if a rally is to sustain, we need data indicating growth and earnings revival,” says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

On the technical front, last week, bulls made several attempts to bounce back, but the overall sentiment remained weak as Nifty slipped for the third consecutive week. For the bulls to gain momentum, the Nifty index needs to breach 23,400 level, while 22,900-22,800 zone may act as a key support for the during the event week.

“However, if the event fails to inspire confidence amid volatility, we may see the sell-off extend, with the next support level around 22500,” says Sameet Chavan, Head Research, Technical and Derivative, Angel One.

On Friday, about 50% of NSE 500 stocks pulled back atleast 2% from the day’s high, pointing to a sharp withdrawal in risk appetite. “We would require an equally dramatic push higher today to negate the emergent downtrend, that is poised for 22,260-22,000 now on the Nifty. The fight back in the last hour of Friday was encouraging towards this end, but we would require a push above 23211 to signal strength. Else, look for 22,800-500 on the first leg,” Anand James, Chief Market Strategist, Geojit Financial Services. 

Akshay Chinchalkar, Head of Research, Axis Securities, says Nifty needs to break above 23,475 in the near-term for a bullish flip, but till that happens 22,976 will remain vulnerable with the longer-term focus in the 22500 - 22800 area.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)