Nifty 50 posts weakest January in over a decade, down over 3% amid global and domestic headwinds

January turned out to be a turbulent period for the Indian stock market, as unfavourable global cues and mixed December-quarter earnings triggered a sharp sell-off across segments. Even the much-awaited free trade agreement between India and the European Union failed to lift investor sentiment, with the Nifty 50 recording its worst January performance in recent years.

Although Indian equities began the year on a firm note, with the Nifty 50 scaling a fresh record high of 26,373, optimism quickly faded following US military action against Venezuela and the capture of President Nicolás Maduro, which heightened geopolitical tensions.

This was further compounded by renewed tensions in the Middle East after US President Donald Trump warned of strikes on Iran.

Trade concerns also kept market sentiment subdued, as Trump, in mid-January, threatened to impose tariffs on European countries starting February 1 if a deal was not reached to acquire Greenland, though he later rolled back the proposal.

He also threatened South Korea and Canada with additional tariffs and earlier this month, Trump warned of a 25% tariff on countries doing business with Iran and announced a steep 500% tariff on nations importing crude oil from Russia.

Since the start of the year, Trump has revived his tariff playbook, which has dampened appetite for riskier assets across global markets.

Back home, domestic factors have also remained unfavourable for bulls, as December-quarter results have so far been mixed, with company bottom lines impacted by high labour costs.

The sharp rise in crude oil prices, coupled with persistent selling by FPIs, has also weighed on market sentiment. According to NSDL data, FPIs have sold shares worth ₹36,000 crore in January, following a record withdrawal of ₹1.66 lakh crore in 2025.

The sell-off by FPIs has not only impacted equities but has also dragged the Indian rupee to multiple lows, with the latest low of 92.28 recorded during Wednesday’s session.

Nifty 50 posts weakest January in over a decade

Against weak global and domestic cues, the Nifty 50 finished the month down 3.10%, or 809 points, at the 25,320 level, marking the index's weakest January performance in over a decade. The last time January recorded such a decline was in 2016, when the index fell nearly 5%.

The fall also extended the index’s losing streak to a second consecutive month, with a decline of 1,053 points, or 4%, from its record high.

Historically, January has been a weak month for the Indian stock market, with the Nifty 50 closing lower in each of the past eight years, including 2026.

Can bulls take charge back in February?

According to analysts, a sentiment reversal depends on the upcoming Union Budget. While the markets do not expect any major surprises in the budget announcement, the key focus is expected to be on capital expenditure allocation, especially in sectors considered strategically important due to prevailing geopolitical compulsions.

In the previous budget, the government shifted its focus towards consumption rather than capital expenditure, aiming to boost domestic demand through tax exemptions for individual taxpayers and rationalising GST rates. Analysts believe that the FY27 Union Budget’s approach to stimulating consumption will be selective.

Markets will closely track capital expenditure allocation, along with the fiscal deficit target and measures aimed at boosting revenue visibility.

Ponmudi R, CEO of Enrich Money, said, "Market participants are anticipating fiscal deficit guidance of 4.3–4.4% for FY27, alongside a continued decline in the debt-to-GDP ratio. Expectations of sustained public capital expenditure in the range of ₹12–12.4 lakh crore (around 3.1% of GDP), with continued focus on infrastructure, defence, electronics, and manufacturing, are supporting the medium-term growth outlook despite ongoing global headwinds."

Disclaimer: We advise investors to check with certified experts before making any investment decisions.