- Sensex and Nifty slipped as IT stocks dragged and renewed U.S. tariff threats over India’s Russian oil imports weighed on sentiment.
- The Nifty IT index fell about 1.4% with HCLTech and Tech Mahindra lower after downgrades, reflecting weak overseas demand and a slow, uneven recovery outlook.
- Foreign portfolio investors pulled about ₹7,608 crore from Indian equities in the first two trading days of 2026, extending 2025’s record outflows.
- Reliance said it received no Russian crude for weeks and expects none in January, underscoring energy and trade risks alongside a weaker rupee.
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The Indian market entered 2026 under renewed strain from external trade pressures, with U.S. tariff threats over India’s Russian oil imports acting as the principal catalyst for investor concern. On January 5, 2026, President Donald Trump warned of further tariffs if India failed to comply. At the same time, Reliance Industries disclosed that in mid‐December to early January, it expected no Russian crude deliveries, signaling potential operational disruption for India’s energy sector should imports fall sharply.
The Information Technology sector—an important contributor to export revenue—bore significant brunt. IT shares slipped about 1.4% ahead of IPOs and earnings, with leading names like HCLTech and TechMahindra down ~2% each, following downgrades—reflecting both demand risk in major foreign markets and valuation compression. Indian IT faces both cyclical (earnings growth slowing, client budget caution) and structural challenges (tariff exposure, visa policy changes).
Compounding this, FII outflows remain central to recent weak market sentiment. The ₹7,608 crore withdrawal in the first two days of the year extends a pattern from 2025, when FPIs pulled out over ₹1.6 lakh crore amid global interest rate pressures, currency depreciation, and elevated trade tensions. The rupee meanwhile has depreciated near the ₹90 per dollar level, adding currency risk to dollar‐denominated revenue exposure—especially in the IT sector.
Despite these headwinds, some countervailing forces exist: Indian consumer demand remains robust; near‐term gains in select sectors like jewellery (Titan), gold (Senco) offer defensive upside. Moreover, earnings season opens with tempered expectations for sectors like IT but a healthier outlook for others. Macroeconomic fundamentals such as stable inflation and strong GDP growth (~7.3% in 2025) provide supportive context for cautiously optimistic medium‐term positioning.
Strategically, the critical variables to monitor are whether India publicly reduces or stops Russian oil imports, progress in trade negotiations with the U.S., and whether foreign capital returns in response to improved global interest rate expectations and risk sentiment. For investors, this suggests positioning away from cyclically exposed and export‐reliant IT names in the short term, and favouring domestically oriented sectors or those with less U.S. tariff exposure. Risk‐management via hedging currency exposure may also become more important.
Supporting Notes
- On January 5, 2026, Sensex dropped 0.38% and Nifty 50 fell 0.30%, after reaching intraday highs; losses were led by IT stocks falling 1.4% ahead of their earnings season.
- HCLTech slid about 2.2% and Tech Mahindra around 1% following analyst downgrades.
- Donald Trump warned of additional U.S. tariffs if India continued importing Russian oil; tariffs already impose up to 50% on certain Indian goods.
- Reliance Industries reported it received no Russian crude oil deliveries for three weeks through early January, and expects none for January.
- FPIs withdrew ₹7,608 crore (≈ USD 846 million) from Indian equities in just the first two days of January 2026.
- Total FPI outflow from equities in 2025 reached approximately ₹1.58 lakh crore (≈ USD 18 billion), making it a record year.
- Analysts expect IT recovery will be uneven; large‐cap IT names with diversified clients may lead a turnaround, while smaller firms remain under pressure.