India's equity benchmarks continued their losses for the fifth straight week, registering their longest losing streak since August 2023, as uncertainties about Trump tariffs, muted corporate earnings, and sustained foreign fund outflows dampened sentiments. For the week, the BSE benchmark Sensex and the NSE Nifty50 declined 1% each, while they have lost nearly 4% over the past five weeks.

The broader market was the worst hit, with the Nifty Midcap and Small cap declining 1.2% and 1.7%, respectively, during the week ended August 1. In the last five weeks, midcap index dropped over 5% and the Smallcap index tumbled over 7%.

"Domestic equity market navigated a volatile week marked by heightened uncertainty surrounding trade negotiations and subdued earnings. The market oscillated between cautious optimism and defensive positioning, ultimately ending lower due to a persistent FII outflow,” said Vinod Nair, Head of Research, Geojit Investments.

Foreign institutional investors (FIIs) have been relentlessly selling Indian stocks, offloading equities worth ₹47,666.68 crore in July, following net purchases of ₹7,489 crore in June. In contrast, domestic institutional investors (DIIs) remained net buyers, investing ₹60,939.16 crore in July, albeit it was lower than the ₹72,673.91 crore infused in the previous month.

On the sectoral front, the realty index was the top laggard, falling as much as 5.5% during the week, followed by telecom (-4.2%), metals (-3.1%), pharma (-2.9%), and IT (-2.5%), dented by demand concerns and prevailing policy uncertainties. On the other hand, FMCG was the top performer, gaining over 3% in the past five sessions, supported by renewed buying interest in frontline stocks such as Hindustan Unilever (HUL) and ITC.

Globally, markets remained under pressure due to rising U.S. inflation and hawkish signals from the Federal Reserve and Bank of Japan, dampening hopes of immediate easing of interest rates, which weighed heavily on emerging markets, said Nair.

The market tone remained stable in the initial sessions, supported by mixed corporate earnings. However, volatility spiked in the latter half of the week following the surprise tariff announcement of 25% on Indian exports by U.S. President Donald Trump, which caught market participants off guard and triggered a risk-off sentiment, said Ajit Mishra, senior vice-president, Research, Religare Broking.

He said that the announcement came at a time when markets were already grappling with hawkish central bank commentary, sustained foreign fund outflows, and a relatively underwhelming earnings season. Additionally, concerns over uneven monsoon distribution and its implications for rural consumption further weighed on investor sentiment.

Events to watch next week

In the upcoming week, markets will closely track developments around the India-U.S. trade deal, as policymakers are expected to respond diplomatically ahead of the next scheduled discussions, said Mishra of Religare Broking. At the domestic level, all eyes will be on the Reserve Bank of India’s monetary policy meeting on August 8, where the central bank’s commentary on inflation, liquidity, and growth outlook will be keenly watched. A dovish tilt could offer support to rate-sensitive sectors.

On the earnings front, results from marquee companies including Bharti Airtel, DLF, Bajaj Auto, Hero MotoCorp, Tata Motors, SBI, and LIC of India will shape sectoral momentum. Other important triggers include the release of the HSBC Services and

Investors will also keep an eye on composite PMI, updates on monsoon progress, crude oil price movement, and further commentary from the U.S. on trade negotiations - all of which are likely to influence near-term volatility.

Volatility likely to peak next week

Volatility is expected to remain high in the coming week amid key central bank decisions, corporate earnings announcements, and trade-related developments. “Investors are advised to maintain a stock-specific approach, focusing on quality companies across sectors that have shown relative strength in the recent downturn,” said Ajit Mishra.

While a defensive stance may be prudent in the short term, selective accumulation in fundamentally strong stocks on dips can offer favorable long-term opportunities. “Sectors vulnerable to global volatility, especially IT and metals, should be approached with caution until greater clarity emerges around U.S. trade policy and macroeconomic trends,” he said.

Going forward, investors will closely monitor the upcoming RBI rate decision next week, while the risks remain tilted to the downside. A stable inflation outlook, potential progress in trade talks, and selective strength in domestic sectors are anticipated to lay the groundwork for a recovery, said Vinod Nair of Geojit Investments.