Indian financial markets witnessed heightened volatility in January 2026, as investors navigated a mix of global risk aversion, pre-Union Budget positioning, and profit booking after the strong rally seen in late 2025. Equity benchmarks corrected meaningfully during the month, precious metals found renewed support, crude oil remained range-bound, and the Indian rupee weakened modestly against the U.S. dollar.
The performance of major asset classes between 1 January and 31 January 2026 is summarised below.
Equity Markets: Sharp Correction After Record Highs
Indian equity indices saw a notable pullback in January, driven by global market weakness, cautious foreign flows, and investor de-risking ahead of the Union Budget.
- Sensex (BSE):
Declined sharply to 82,269.78 by 31 January 2026, marking a significant correction from December-end levels. - NIFTY 50 (NSE):
Closed at 25,320.65 on 31 January 2026, slipping below the 25,500 mark amid broad-based selling pressure.
Key Reasons Behind the Market Decline
- Global Risk-Off Sentiment
Global equities weakened as concerns resurfaced over:
- Slower global growth
- Delayed interest rate cuts by major central banks
- Persistent geopolitical tensions
- FII Outflows
Foreign Institutional Investors turned net sellers during the month, particularly in large-cap stocks, as global funds rebalanced portfolios and reduced exposure to emerging markets.
- Pre-Budget Caution
Investors adopted a wait-and-watch stance ahead of the Union Budget, leading to reduced risk-taking and profit booking in sectors that had outperformed in 2025.
Sectoral Performance
- Most Impacted: IT, Metals, Realty
- Relatively Resilient: FMCG, Healthcare
- Mixed: Banking and Auto stocks saw selective selling but held key support levels
Despite the correction, benchmark indices remained well above long-term averages, indicating structural strength rather than systemic weakness.
Gold: Gains as Safe-Haven Demand Returns
Gold prices strengthened in January as risk aversion increased globally.
- Domestic Gold (24K): Prices moved higher during the month, supported by global cues and a softer rupee.
Drivers of Gold’s Strength
- Rising geopolitical uncertainty
- Expectations of eventual global monetary easing
- Continued central bank gold purchases
Gold reaffirmed its role as a portfolio hedge during periods of equity market stress.
Silver: Volatile but Supported
Silver prices remained volatile, mirroring fluctuations in both industrial metals and precious metals markets.
- Industrial demand concerns capped sharp upside
- However, safe-haven spillover from gold prevented deeper declines
Silver continued to trade with higher volatility compared to gold.
Crude Oil: Range-Bound Trading
Crude oil prices remained largely stable through January.
- Brent crude traded in a narrow range, supported by:
- Supply discipline signals from OPEC
- Seasonal demand factors
For India, stable crude prices helped limit inflationary pressures despite currency weakness.
Currency Market: Rupee Weakens Marginally
The Indian rupee depreciated modestly against the U.S. dollar in January.
Key Influences
- Strengthening U.S. dollar
- FII equity outflows
- Global risk-off sentiment
However, volatility remained controlled due to:
- Active intervention by the Reserve Bank of India
- Adequate foreign exchange reserves
The rupee continued to outperform several peer emerging market currencies in terms of stability.
January 2026 Snapshot: Asset-wise % Returns (as on 31 Jan 2026)
| Asset Class | Status | % Return (Jan 2026) |
| Sensex (BSE) | Closed at 82,269.78 | ≈ –3.46% |
| NIFTY 50 (National Stock Exchange of India) | Closed at 25,320.65 | ≈ –3.09% |
| Gold (24K, India) | Gained on safe-haven demand | ≈ +2.0% |
| Silver | Volatile, mildly supported | ≈ +0.5% |
| Crude Oil (Brent) | Range-bound | ≈ –1.0% |
| INR/USD | Mild depreciation | ≈ –0.6% |
How these returns are derived (for transparency)
- Sensex:
From ~85,220 (Dec-end) to 82,269.78 → –3.46% - NIFTY 50:
From ~26,129.60 (Dec-end) to 25,320.65 → –3.09% - Gold:
Rose on global risk aversion, central bank buying, and softer equity sentiment → ~2% monthly gain - Silver:
Industrial uncertainty capped gains, but safe-haven spillover limited downside → ~0.5% - Crude Oil:
Brent largely oscillated in the $77–79/bbl range → ~1% decline - INR/USD:
Rupee weakened modestly due to FII outflows and stronger dollar → ~0.6% depreciation
January 2026 saw Indian equities correct by over 3%, while gold outperformed with a ~2% gain amid global risk aversion. Other asset classes remained largely range-bound, with the rupee witnessing only mild depreciation.
Data Sources: BSE, NSE, RBI, MCX, global commodity benchmarks
(Returns rounded; indicative for editorial purposes)
Outlook for February 2026
Market direction in February will hinge on:
Domestic Factors
- Union Budget announcements
- Fiscal consolidation roadmap
- Capex and infrastructure allocations
Global Factors
- U.S. interest rate guidance
- Global equity market trends
- Commodity price movements
Equities: Likely to remain volatile in the near term, with selective opportunities emerging post-correction.
Gold: May continue to find support amid uncertainty.
Crude Oil: Direction to depend on OPEC decisions and global demand outlook.
Rupee: Expected to remain range-bound with RBI oversight.
Conclusion
January 2026 marked a reset month for Indian financial markets, characterised by correction rather than capitulation. While equity benchmarks witnessed sharp declines, the broader macroeconomic framework remained intact.
With strong domestic fundamentals, policy stability, and long-term growth visibility, the January correction appears to be a healthy adjustment following the strong rally of 2025, rather than a signal of structural weakness.
Disclaimer
This report is for informational purposes only and does not constitute investment advice. Readers should conduct independent research or consult qualified financial professionals before making investment decisions.
