Has the Market’s Two-Week Rally Finally Run Out of Steam After Brutal Weekly Losses?

Contents

Benchmark Indices Slide for Five Straight Sessions Despite Late Bounce Large-Cap Stocks Drag Indices Lower as Select Leaders Buck the Trend Mid-Cap and Small-Cap Segments Face Heavier Selling Pressure Here’s What Happened Today and Why Traders Reacted Sectoral Performance Shows Clear Risk-Off Rotation Foreign Investors Continue Selling, DIIs Offer Strong Support Rupee Remains Stable, Offering Comfort to Macro View What This Means for Traders in the Coming Days How This Week’s Fall Impacts Investor Portfolios A Market Reset, Not a Market Breakdown

Indian equity markets saw a sharp shift in mood this week, as a two-week rally came to an abrupt halt and benchmarks recorded their worst weekly performance in over three months. Selling pressure dominated Dalal Street across five consecutive sessions, wiping out nearly ₹13.49 lakh crore in investor wealth and forcing traders to reassess near-term risk.

Although benchmark indices attempted a rebound on the final trading day, the broader tone of the week remained cautious, driven by persistent foreign fund outflows, sectoral weakness and profit-booking in overheated pockets of the market.

Benchmark Indices Slide for Five Straight Sessions Despite Late Bounce

For the week ending January 9, 2026, the Nifty 50 and Sensex declined for five consecutive sessions, marking the sharpest weekly correction since early October.

On the final trading day, markets saw a technical recovery:

The BSE Sensex jumped 720.56 points or 0.84% to close at 85,762.01
The Nifty 50 gained 286.25 points or 1.09% to end at 26,328.55

However, market participants largely treated this rebound as short-covering rather than fresh conviction buying.

A senior market dealer at a domestic brokerage said,

“The bounce on Friday looked more like technical short covering than a trend reversal. The broader undertone is still cautious.”

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Large-Cap Stocks Drag Indices Lower as Select Leaders Buck the Trend

The BSE Large-cap index declined 2.5% over the week, weighed down by losses in heavyweight stocks such as:

Waaree Energies
IDBI Bank
Trent
Swiggy
Adani Energy Solutions

At the same time, select large caps managed to stay resilient. Stocks such as Solar Industries India, Bharat Electronics, Titan Company, ICICI Bank, Lupin, Divi’s Laboratories and Union Bank of India ended the week in positive territory, offering some stability to portfolios.

This divergence indicates that investors are becoming more selective, favouring earnings visibility and quality balance sheets over momentum names.

Mid-Cap and Small-Cap Segments Face Heavier Selling Pressure

The correction was more pronounced in the broader market.

The BSE Mid-cap index declined 2.6% during the week, with stocks like Premier Energies, Mahindra & Mahindra Financial Services, Jindal Stainless, Suzlon Energy, Hindustan Petroleum Corporation and Rail Vikas Nigam witnessing sustained selling pressure.

The BSE Small-cap index fell nearly 4%, reflecting risk-off sentiment among traders. Several stocks recorded steep weekly declines of 15–23%, including:

Systematix Corporate Services
Balu Forge Industries
Sai Silks Kalamandir
Transformers and Rectifiers India
Wardwizard Innovations
Baazar Style Retail
Sandur Manganese and Iron Ores

A fund manager at a Mumbai-based AMC said,

“Small and midcaps had run ahead of fundamentals in many pockets. This correction looks like a healthy reset rather than a breakdown.”

Here’s What Happened Today and Why Traders Reacted

Friday’s session offered some relief after days of selling, but traders remained cautious in their positioning.

Here’s how market participants reacted:

Short covering lifted benchmark indices in the final session
Bank stocks attracted selective buying, supporting the Nifty
Mid-cap and small-cap counters saw limited recovery, indicating weak risk appetite
Intraday traders focused on volatility rather than directional bets

The overall takeaway from today’s action was clear: markets are stabilising, but confidence is still fragile.

Sectoral Performance Shows Clear Risk-Off Rotation

Sectoral indices reflected the changing sentiment across the market.

The weakest performers of the week included:

Nifty Oil & Gas, Nifty Energy and Nifty Infra, which declined 4–5%
Nifty Metal, Realty, Media and Auto, each slipping more than 2%

In contrast, defensive and theme-based segments showed resilience:

The Nifty Defence index gained 1.3%
The Nifty Consumer Durables index rose 1%

This rotation suggests that investors are seeking earnings visibility and policy-backed themes, while trimming exposure to cyclical and volatile sectors.

Foreign Investors Continue Selling, DIIs Offer Strong Support

Flows data remained a critical driver of market sentiment.

During the week:

Foreign Institutional Investors (FIIs) sold equities worth ₹9,209.90 crore
Domestic Institutional Investors (DIIs) bought equities worth ₹17,594.58 crore

The strong buying by domestic institutions helped cushion the fall and prevented deeper damage to benchmark indices.

Market experts believe that DII flows are now acting as a structural stabiliser, offsetting the impact of global risk-off sentiment.

Rupee Remains Stable, Offering Comfort to Macro View

Despite equity volatility, the currency market remained relatively calm. The Indian rupee traded in a narrow range between 89.73 and 90.29 during the week and ended almost flat at 90.16 per dollar on January 9, compared to 90.19 on January 2.

A stable rupee helped ease concerns around sudden foreign capital flight and supported broader macro sentiment.

What This Means for Traders in the Coming Days

For short-term traders, the current market environment calls for caution and discipline.

Key factors likely to influence near-term moves include:

Continued FII activity and global risk sentiment
Earnings updates and management commentary
Technical support levels on Nifty and Bank Nifty
Behaviour of mid-cap and small-cap stocks

Volatility may remain elevated, making stock selection and risk management more important than broad index bets.

How This Week’s Fall Impacts Investor Portfolios

For long-term investors, the correction serves as a reminder that markets do not move in straight lines. The recent decline may impact portfolios in the short term, but it also presents opportunities.

Portfolio implications include:

Overheated small-cap positions may need reassessment
Quality large caps could emerge as safer allocation zones
SIP investors may benefit from better entry levels
Asset allocation discipline becomes more critical during volatile phases

As one portfolio strategist put it,

“Corrections are uncomfortable, but they are also the phase where long-term wealth is built.”

A Market Reset, Not a Market Breakdown

While the end of the two-week rally has shaken sentiment, the broader market structure remains intact. Strong domestic flows, stable currency movement and selective leadership in quality stocks suggest that this is a phase of consolidation rather than collapse.

For investors and traders alike, the message from this week is simple: volatility is back, but so are opportunities — for those who remain disciplined.