Small Caps Plunge 4%, Indian Markets Post Worst Weekly Loss in 3 Months

Indian Equities Face Steep Weekly Losses, Small Caps Lead Decline

Indian stock markets recorded their worst weekly performance in over three months, with broader indices showing significant weakness. The small-cap index was particularly hard-hit, shedding nearly 4 percent, a sharp underperformance compared to the mid- and large-cap segments which declined around 2.5 percent each.

The benchmark BSE Sensex closed down 2.54 percent for the week at 83,576.24, losing 2,185.77 points. Similarly, the Nifty 50 index fell 2.45 percent, shedding 193.55 points to end at 25,683.30. This downturn was fueled by a confluence of factors, including escalating geopolitical tensions, sustained selling pressure from foreign institutional investors (FIIs), and anxieties over potential U.S. tariffs.

Sectoral Performance Mixed Amid Broader Weakness

Sectoral performance showed divergence. The Nifty Oil & Gas, Nifty Energy, and Nifty Infra indices bore the brunt of the selling, each falling 4–5 percent. The Nifty Metal, Realty, Media, and Auto indices also succumbed to pressure, slipping more than 2 percent. Conversely, defensive sectors like the Nifty Defence index managed a gain of 1.3 percent, and the Nifty Consumer Durables index rose 1 percent, indicating selective pockets of resilience.

FII Outflows Continue, DIIs Provide Support

Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth ₹9,209.90 crore during the week. This outflow pressure was partially offset by robust buying from Domestic Institutional Investors (DIIs), who supported the market by purchasing equities worth ₹17,594.58 crore. This dynamic highlights a tug-of-war between foreign and domestic capital flows.

Market Sentiment Dampened by Global Headwinds

Market sentiment was subdued, influenced by rising global uncertainties. According to Vinod Nair, Head of Research at Geojit Investments, factors such as increased government borrowing driving bond yields upward, coupled with global headwinds like the Venezuela–U.S. standoff, concerns over Russian oil imports, and China’s export restrictions on rare earth minerals, weighed on investor confidence.

Profit-booking was evident in sectors like autos, metals, and oil & gas. While some buying interest emerged in consumer durables anticipating a demand revival, the week concluded on a cautious note ahead of anticipated U.S. Supreme Court rulings on tariffs, which could introduce further levies under Russian sanctions.

Technical Outlook Suggests Continued Weakness

Technically, the Nifty has shown increasing weakness, slipping below key moving averages. Rupak De, Senior Technical Analyst at LKP Securities, noted that the trend might remain weak in the short term, with potential downside targets towards 25,550–25,500 if the 25,700 support level is breached. Ajit Mishra, SVP, Research, at Religare Broking, indicated that a decisive break below the 100 DEMA around 25,600 could lead to further declines towards 25,450 and 25,300.

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, observed a sharp downtrend indicated by the weekly chart, suggesting potential for more weakness in the coming week, with a slide below 25,700 potentially opening the path to 25,400.