Indian Stocks Plummet: 70% of Nifty 500 Fall in January 2026
Overview
Indian equity markets began 2026 with significant weakness, as 70% of Nifty 500 stocks posted losses by January 13th. This marks the second-worst start to a year since 2020. Foreign institutional investor selling, global trade tensions, and US tariff threats are cited as key drivers. Investors now eye the upcoming Union Budget and Q3 FY26 earnings for a potential market revival.
Stocks Mentioned
Indian Equities Face Steep January Sell-off
Indian stock markets have kicked off calendar year 2026 with broad-based weakness, mirroring global sentiment. As of January 13, 2026, a substantial 70% of stocks within the Nifty 500 index have registered negative returns. This performance positions January 2026 as the second-worst start to a year for the index pack in the last five years, dating back to 2020.
Broader Market Underperformance
At the index level, the Nifty 500 has declined by 1.6% in the current year, with the benchmark Nifty 50 index down by 1.5%. This slide highlights a significant underperformance compared to global peers. For instance, the US S&P 500 index has seen gains of nearly 2% by January 12, while Japan's Nikkei index has posted year-to-date returns exceeding 6%.
Drivers of the Downturn
Devarsh Vakil, Head of Prime Research at HDFC Securities, attributes this divergence to aggressive foreign institutional investor (FII) selling, coupled with ongoing global trade uncertainties and threats of US tariffs under President Donald Trump. He notes that policy support and AI-driven rallies have primarily benefited select US and Asian markets.
Technical Indicators Signal Caution
The market breadth remains tepid, with 348 Nifty 500 stocks showing declines this month. Godfrey Phillips stock has been among the hardest hit, shedding 20% of its value. Other prominent laggards include ITC, Elecon Engineering, Tejas Networks, and Signatureglobal (India), with losses ranging from 13% to 17%. Technically, over 60% of Nifty 500 constituents have fallen below their long-term 200-day moving average (200-DMA), indicating a negative bias. Furthermore, 40 stocks are trading in 'oversold' territory according to the Relative Strength Index (RSI).
Outlook: Budget and Earnings in Focus
Analysts suggest that the Indian equity markets may have largely factored in the current negative catalysts. Attention is now shifting towards the Union Budget 2026-27 and the December quarter (Q3FY26) earnings season for a potential revival in investor sentiment. While tempered expectations exist for Q3 earnings, sustained momentum could spur a turnaround. The Union Budget might offer support through capital expenditure pushes and MSME packages, though fiscal constraints limit significant stimuli. Sector-specific themes like defense, railways, and rural economy are expected to see rotation rather than a broad market uplift. A significant market-wide recovery hinges on meaningful earnings upgrades and avoiding unforeseen global shocks.
