Market Meltdown: Indian Indices Plunge as Domestic Headwinds Overshadow Global Gains

In a volatile session leading into the Republic Day long weekend, the Indian equity benchmarks witnessed a sharp correction on Friday, Friday, January 23, 2026. While global cues remained largely positive following an easing of trade tensions in the West, domestic sentiment was battered by a deepening regulatory crisis surrounding the Adani Group and an relentless exodus of foreign capital. The session marked the culmination of the worst weekly performance for Indian indices since September 2025, with a staggering ₹16 trillion in market capitalization erased over the past five trading days.

Executive Summary and Index Performance

The bears dominated the street on Friday, Friday, January 23, 2026, as the Nifty 50 and Sensex both closed nearly 1% lower. The primary catalysts for the decline included reports of the US SEC seeking court approval for summons against Adani Group promoters and a disappointing Q3 earnings season.

Benchmark Indices Performance

Market Mechanics: Intraday Volatility

The markets opened on a cautious note, attempting to track positive Asian and US cues. However, any early gains were quickly liquidated as news regarding the US Securities and Exchange Commission's (SEC) move against Gautam Adani and Sagar Adani reached the trading floor. Selling pressure intensified in the afternoon session, dragging the Nifty below the crucial 25,100 support level. The Bank Nifty experienced even steeper drawdowns, falling 1.23% to settle at 58,473.10, reflecting broader concerns about systemic risk and credit growth.

Top Movers Analysis

The Gainers: Pockets of Resilience

Despite the carnage, a few quality stocks managed to find buyers:

1. Dr. Reddy's Laboratories (+1.72%): The pharma giant led the Nifty gainers, buoyed by the Indian government's decision to slash new drug application review periods to 45 days. This regulatory tailwind provided a significant boost to the sector's outlook.
2. ONGC (+0.86%): Benefited from a 0.9% uptick in Brent crude prices to $64.61 per barrel, alongside operational improvements in domestic production.
3. Tech Mahindra (+0.79%): Emerged as a beacon in the IT space, supported by a rallying Nasdaq and a slightly weaker Dollar Index, which fell to 98.37.
4. Hindalco Industries (+0.69%): Bucked the metal sector's weakness due to firming international aluminum prices and improved operational efficiencies.
5. Hindustan Unilever (+0.64%): Saw defensive buying as investors sought refuge in high-quality FMCG names with stable dividend yields and urban consumption resilience.

The Losers: Adani-Led Carnage

The losers' list was dominated by the Adani Group following legal developments in the United States:

1. Adani Enterprises (-10.76%): The group's flagship firm saw a double-digit crash as institutional investors panicked over the SEC's legal summons request.
2. Adani Ports (-7.02%): Followed suit as contagion risks spread across the conglomerate's listed entities.
3. Eternal (-5.74%): Faced intense selling pressure, emerging as one of the session's worst-performing non-conglomerate stocks.
4. IndiGo/InterGlobe Aviation (-3.95%): Plunged after a dismal Q3 report showing a 77.5% decline in net profit, highlighting the severe margin pressures in the aviation sector.
5. Jio Financial Services (-3.58%): Slid amid fears that the completion of the Payments Infrastructure Development Fund (PIDF) would impact fintech toplines.

Sectoral Deep Dive

The sectoral landscape on January 23, 2026, was overwhelmingly red, with Realty and Banking leading the descent.

• Realty (-3.75%): The worst-performing sector of the day. Investors liquidated positions amid rising funding costs and concerns over project execution delays.
• Banking (-1.23%): Faced heavy FII selling. State Bank of India fell 1.90%, while Axis Bank dropped 3.16%, reflecting a broader risk-off sentiment in financial heavyweights.
• Auto (-1.13%): Despite healthy December sales data, stocks like Maruti Suzuki (-1.56%) fell as the market priced in competitive pressures and margin normalization.
• IT (-0.17%): The most resilient sector. The Nifty IT index was supported by a strong overnight close on the Nasdaq and reduced US tariff threats.
• Pharma (-0.94%): While Dr. Reddy's shone, the sector was dragged down by Cipla, which reported a shocking 57% drop in Q3 net profit.

Institutional Activity: FII vs. DII Tug-of-War

Foreign Institutional Investors (FIIs) remained relentless sellers, offloading a net ₹4,113.38 crore on Friday. This took the cumulative FII outflows for January 2026 above ₹36,500 crore, a record-breaking exodus driven by high domestic valuations and the Rupee hitting a record low of 91.99 per dollar earlier in the week.

Conversely, Domestic Institutional Investors (DIIs) acted as the market's primary stabilizer, recording a net purchase of ₹4,102.56 crore. This near-perfect offset highlights the growing influence of domestic SIP flows and insurance capital in providing liquidity during foreign selloffs.

Market Breadth and Global Cues

The market breadth presented a deceptive picture. On the NSE, 2,483 stocks advanced against 900 declines, suggesting strength in the small-cap segment. However, the BSE 500 advance-decline ratio was a dismal 0.27x, confirming that the high-capitalization stocks that drive indices were under severe stress.

Globally, the environment was surprisingly supportive. President Donald Trump's decision to step back from tariff threats linked to Greenland fueled a 0.88% rise in the Nasdaq and a 0.62% gain in the Dow Jones. Asian markets like the KOSPI (+0.93%) and Taiwan Weighted (+0.60%) also closed higher. India's decoupling from these global gains underscores the severity of domestic regulatory and earnings concerns.

Key News Impact Analysis

1. Adani Regulatory Overhang: The US SEC's move to issue summons to Gautam and Sagar Adani remains the single largest risk factor for the market, impacting not just group stocks but broader governance perception.
2. Earnings Recession: Disappointing results from IndiGo (Profit -77.5%) and Adani Green (Profit -99%) have raised alarms regarding the mid-cap earnings trajectory for FY26.
3. Currency Weakness: With the Rupee hovering near 91.99, FIIs are facing significant currency-related losses, further incentivizing exits from the Indian market.

Technical Outlook and Strategic Implications

The Nifty 50 has closed below its 50-day moving average, a technically bearish signal. The immediate support now rests at the 25,000 psychological mark. A breakdown below this level could open the doors toward 24,700. On the upside, 25,300 acts as a stiff resistance.

For Retail Investors: The current volatility warrants a defensive posture. While the long-term structural story of India remains intact, the immediate combination of FII selling and regulatory uncertainty suggests that 'buying the dip' should be restricted to high-quality companies with proven governance records and resilient earnings. Disciplined SIP investing remains the preferred route to navigate this choppy environment as the market awaits the Union Budget catalysts in February.