Investors' ₹8 lakh crore wealth wiped out in just two hours of trading: What's next?

The Indian stock markets faced significant pressure on January 27, with the Nifty50 index slipping to a seven-month low. The benchmark index closed at 22,829, down by 263 points, as 42 out of its 50 constituent stocks finished in the red. The sell-off gained momentum after a weak performance on Friday, with intraday recovery attempts unable to sustain amid consistent selling pressure.

Nifty50 opened with a downside gap of 152 points, and the losses widened throughout the session. Although the index found support near the 22,800 level, the broader market experienced severe declines. The midcap index is now down 15% from its peak, and all sectoral indices ended lower. PSU, Pharma, and IT stocks bore the brunt of the selling.

Among the Nifty stocks, ICICI Bank gained 1.55% after strong Q3 results, while FMCG stocks like Hindustan Unilever and Britannia performed well, with gains of over 1%. However, the IT index fell by 3%, with companies like HCL Tech, Tech Mahindra, and Wipro being the biggest losers.

The broader market downturn wiped off ₹8 lakh crore in investor wealth in just two hours of trading on Monday, highlighting the scale of the sell-off.

Global Factors and Investor Sentiment

Market sentiment remains fragile ahead of key global and domestic events. Investors are cautious as they await the Federal Reserve’s rate decision and policy guidance on January 31. Mixed earnings reports, ongoing geopolitical tensions, and the upcoming Union Budget have added to the prevailing uncertainty.

In addition, developments on the global stage, such as the rise of DeepSeek, a Chinese AI startup, and former U.S. President Trump's surprise tariff announcement on Colombia, are causing concern. DeepSeek has quickly become the top free app on the iOS App Store, positioning itself as a competitor to ChatGPT, which is shifting towards a for-profit model.

Focus on Earnings Reports

Stocks like Coal India, Tata Steel, Indraprastha Gas, Kaynes Technology India, and Piramal Enterprises, which announced their December quarter results after market hours on January 27, will be in focus on January 28. Key earnings reports are also expected from Bajaj Auto, Hindustan Zinc, Hyundai Motor India, Bharat Heavy Electricals, Cipla, JSW Energy, Suzlon, ideaForge Technology, and TVS Motor Company.

Foreign investors have continued to be net sellers in the cash market, contributing to the negative sentiment, while domestic investors remain net buyers.

Nifty50 Technical Analysis

Analysts are bearish on the short-term outlook for Nifty. Nagaraj Shetti of HDFC Securities noted that the index is holding support around 22,700-22,650, with immediate resistance at 23,000. LKP Securities’ Rupak De mentioned that the index has broken its recent consolidation, increasing pessimism, and suggested the potential for a further decline towards 22,500 if the index stays below 23,000.

Osho Krishnan from Angel One added that the 23,000-23,050 range could act as a resistance zone for any potential pullbacks, with 23,350 posing a formidable obstacle due to its alignment with the 20-day exponential moving average (DEMA).

Ajit Mishra from Religare Broking also highlighted the 22,700 level as crucial support. A break below this level could worsen market conditions. He advised focusing on risk management, especially in mid-cap and small-cap segments, and avoiding additional losses in trading positions.

Stocks to Watch for January 28

Several companies will be in the spotlight as they reported their quarterly results:

Coal India: Net profit fell 17.5% YoY to ₹8,491.2 crore, with revenue down 1% at ₹35,779.8 crore. EBITDA declined by 5% to ₹12,317 crore, and margins contracted by 150 basis points to 34.4%.

Tata Steel: Net profit plummeted 43.4% YoY to ₹295.5 crore, while revenue fell by 3% to ₹53,648.3 crore. EBITDA dropped by 5.8% to ₹5,900.6 crore, with margins standing at 11%.

Indraprastha Gas: Net profit declined 33.7% QoQ to ₹285.8 crore, although revenue rose by 1.7% to ₹3,759.1 crore. EBITDA fell by 32% to ₹363.7 crore, with margins contracting by 480 basis points to 9.7%.

Tata Power: Its solar arm, TP Solar, secured a ₹455 crore contract to supply 300 MWp ALMM-certified solar modules for the Mukhyamantri Saur Krushi Vahini Yojana (MSKVY) 2.0 project in Maharashtra.

The trading session on January 28 will be crucial as investors watch for any signs of stability in global markets and await further economic data.