Indian equity market extended its losing streak to a fourth consecutive week, the longest in 2025 so far and the first such stretch since October 2024, as investor sentiment remained subdued ahead of the looming U.S. tariff deadline. The equity benchmarks, Sensex and Nifty, declined by around 0.5% during the week ended July 25, 2025, with the sell-off intensifying in the last two sessions as concerns over potential trade tensions and global economic uncertainty took centre stage.

The Sensex nosedived 1,264 points and the Nifty dropped 383 points over two sessions, dragged by weak global cues, persistent FII outflows, and tepid earnings. This wiped out nearly ₹10 lakh crore in investor wealth, with BSE market capitalisation slipping to ₹451.68 lakh crore from ₹461.43 lakh crore as of July 23.

Broader markets took a bigger hit, with the BSE Small-Cap index fell 2.3% and the Mid-Cap index losing 1.6%. Sectorally, realty, IT, energy, and FMCG stocks led the decline.

On Friday, the 30-share Sensex closed at 81,463.09, down 721 points or 0.88%, and the Nifty50 at 24,837, down 225 points or 0.9%. The broader market saw sharp selling, with the Nifty MidCap index falling 1.61% and the Nifty SmallCap index tumbling 2.1%.

"This persistent weakness can be attributed to a combination of factors - the absence of strong positive triggers, Q1 earnings from key corporates coming below expectations, and lingering uncertainty on the global trade deal front, all of which have dampened investor sentiment," said Sudeep Shah, Head - Technical and Derivatives Research, SBI Securities.

FII sell-off intensifies, DIIs provide support

Concerns over potential trade tensions and global economic uncertainty weighed heavily on the markets, triggering continued selling by foreign institutional investors (FIIs). FIIs pulled out ₹13,552 crore from Indian equities during the week, reflecting heightened risk aversion and caution.

In comparison, domestic institutional investors (DIIs) offered strong counterbalance, pumping in ₹17,932 crore and helping cushion the fall in equities.

“Investor sentiment remained fragile amid ongoing uncertainty over U.S.-India tariff negotiations and the ECB maintaining the status quo, with rate cuts deferred until clearer insights emerge on the inflationary impact of trade developments. Moderation in DII inflows after the strong buying of the last 2-3 months due to a muted earnings season and persistent FII selling continues to impact the current market," said Vinod Nair, Head of Research, Geojit Investments.

FIIs remained net sellers throughout the week, with the largest single-day outflow of ₹4,209 crore on July 23, followed by ₹3,549 crore on July 22. Meanwhile, DIIs ramped up their purchases steadily, peaking at a net inflow of ₹5,240 crore on July 22.

On a month-to-date basis, FIIs have sold ₹30,509 crore worth of equities, while DIIs have infused ₹39,826 crore, underlining strong domestic conviction amid global volatility.

Key market triggers

The market's direction was initially influenced by earnings announcements, with the banking sector showing strength due to positive results from HDFC Bank and ICICI Bank. However, a dip in stocks like Reliance capped the recovery, said Ajit Mishra - SVP, Research, Religare Broking.

Furthermore, foreign fund outflows and uncertainty over trade deals ahead of the August 1 deadline kept volatility high. Nevertheless, the signing of the free trade agreement (FTA) between India and the UK offered some support to the market, he said.

Events to watch this week

The start of the new month will bring attention to key economic data, including Industrial Production (IIP) and HSBC Manufacturing PMI on August 1. Additionally, monthly auto sales figures will be closely monitored. The scheduled expiry of the July derivatives contracts may add further volatility to the markets, said Mishra of Religare Broking.

As the earnings season progresses, results from heavyweights such as IndusInd Bank, Asian Paints, NTPC, Tata Steel, Hindustan Unilever, Mahindra & Mahindra, Maruti Suzuki, Sun Pharma, ITC, and others will be tracked for insights on sectoral resilience and corporate performance.

Globally, traders will focus on the U.S. Fed's interest rate decision and GDP growth numbers, along with updates on trade negotiations ahead of Trump’s August 1 tariff deadline, which could impact FII flows.

Earnings disappoint, market seeks catalyst

The earnings season so far has largely fallen short of expectations, with several major companies reporting weaker-than-anticipated results. This underperformance has dampened investor sentiment, especially at a time when markets were hoping for strong earnings to act as a key catalyst for upward momentum, said Sudeep Shah of SBI Securities.

“Beyond earnings, the absence of any significant positive domestic triggers and the continued uncertainty surrounding global trade negotiations have added to the cautious mood. These combined factors are contributing to the downward pressure on the market,” he said.

While weak earnings alone may not be the sole reason for the market correction, when coupled with global headwinds and a lack of fresh buying triggers, they certainly add weight to the bearish undertone prevailing in the current environment, Shah explained.

Volatility to persist next week

Market volatility is likely to persist next week as the U.S. tariff deadline draws closer. “We expect the market to remain volatile in the upcoming week due to the heavy earnings calendar, global cues, and the scheduled expiry of derivatives. Investors should adopt a selective approach, focusing on sectors with strong earnings performance,” said analyst at Religare Broking.

Given the current sentiment, any favourable development on the global front, especially concerning US-led trade negotiations, could offer a much-needed lift to the markets. Even incremental progress in talks may help soothe investor nerves. Likewise, stronger-than-expected earnings from the remaining set of quarterly results could lend support at lower levels and help stabilise the broader market.

On the technical front, the 100-day EMA zone of 24,600–24,550 is expected to serve as immediate support for the Nifty index, said analyst at SBI Securities. A sustained breach below 24,550 could trigger a deeper correction towards the 24,200 level. On the upside, the 20-day EMA zone of 25,100–25,150 remains a key resistance, and a decisive move above this range will be crucial for any recovery.

(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.)