Stock market today: Nifty 50, Sensex slide for 3rd day amid concerns over earnings slowdown in Q3

Indian Stock Market: The sell-off in Indian markets has extended to a third consecutive trading session on Friday, January 10, as it appeared bears took full control of the market, leaving little room for bulls to push the indices higher.

Both the Nifty 50 and Sensex ended today’s trading session in negative territory. While there was some support from the entire IT pack, the weak contribution from the financials and other heavyweights dragged the markets lower, also pushing the indices to record their worst weekly performance in 2025.

The Nifty 50 ended the session with a drop of 0.40%, settling at 23,431 points, while the Sensex wrapped up the session with a drop of 0.31%, at the 77,378 level. It was the mid- and small-cap stocks that continued to be hammered by investors sharply in Friday’s session.

The Nifty Smallcap 100 index tumbled 2.61% to end the session at a 6-week low of 77,378, also losing 7.29% for the week. Likewise, the Nifty Midcap 100 index finished the session with a decline of 2.08%, settling at 54,585. For the week, the index lost 5.77% of its value.

The frontline indices also posted notable weekly losses, with the Nifty 50 ending the week with a drop of 2.40% and the Sensex closing the week with a decline of 2.33%.

Commenting on today’s market performance, Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd said, “Markets continued its downward trajectory as rupee scaling new lows due to strengthening dollar has further dampened investors’ sentiment. Amid concerns of subdued economic growth and expectations of a slowdown in the quarterly earnings, investors cut their bet on banking and mid & small cap stocks.”

“With expensive valuations of Indian markets at large still a concern, investors would mostly resort to stock-specific activities,” Prashanth added. 

Meanwhile, recent data showed that every time the frontline indices make a comeback, closing with over 0.5% gains, it is followed by sessions of strong selling, which indicates that investors appear to be taking advantage of every rise to book profits.

On January 2, the Nifty 50 and Sensex both closed with gains of nearly 2%, but in the following trading sessions, the momentum quickly worsened as they finished 5 out of 6 trading sessions in the red, losing nearly 3% each.

In earlier instances, too, the indices behaved similarly. For instance, on December 13, they both gained nearly 1% but ended the following 4 out of 5 sessions in the red.

What’s behind the market’s struggles

The recent sell-off in stocks follows concerns that Q3FY25 could be another quarter of modest performance for Indian Inc. The market had anticipated a strong recovery from corporate India in Q3, but recent business updates released by companies have shown moderate growth in their numbers. This has raised fears that EPS downgrades and cuts in target multiples could persist.

Weaker-than-expected numbers in Q2FY25 dragged the markets during the last quarter of CY2024, and elevated valuations further damaged investor sentiment. A majority of analysts believe this trend could continue in January, as they expect modest performance from corporate India in the December quarter.

Nuvama Institutional Equities forecasts Nifty 50 earnings to grow 2% YoY in Q3FY25 (H1FY25: 4%). “This poses risks to the mid-teens earnings growth forecast for H2FY25 and FY26. The more worrying aspect is that a slowdown in earnings is now being led by demand rather than an external/liquidity shock. Hence, reversing this trend will require a significant policy response, which, at present, is not on the anvil,” said the brokerage.

The brokerage highlights that the combination of slowing earnings amid record-high valuations and tightening liquidity warrants caution. It advises that investors will need to brace for volatility in 2025.

The expectation of moderate earnings is also dampening overseas investor sentiment, as they have resumed their selling streak in Indian equities in the new year. FPIs pulled out ₹7,170 crore through exchanges during Thursday’s trading session, taking their total selling figure to ₹19,102 crore so far this month, as per the Trendlyne data.

Other factors, such as concerns over a slowdown in the Indian economy, lower-than-anticipated Fed rate cuts in 2025, an expected uptick in global inflation due to Donald Trump’s trade policies, a strong dollar crushing emerging market currencies, and a spike in crude oil prices, are weighing on investors.

Is more pain in store for the markets?

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates, said, “Nifty opened marginally positive, faced weakness, and closed negatively at 23,432. The volatility index, India VIX, increased by 1.75% to 14.92, indicating heightened market volatility.”

“Technically, on the daily chart, Nifty formed a red candle and closed below the demand zone of 23,460–23,500, indicating weakness. Immediate resistance is seen at 23,940, where the 200-Day Simple Moving Average (200-DSMA) is located. Sustaining below 23,460 could drag the index toward 23,300–23,260 levels,” Hrishikesh noted.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.