Sensex plunges 4% in January: Buy the dip or wait?
What's the story
India's leading stock indices, the Sensex and Nifty, have seen a decline of over 4% this month. The fall is largely attributed to continued foreign fund outflows, a depreciating rupee, lackluster corporate earnings, geopolitical tensions, and new tariff worries. The 30-share BSE Sensex has plummeted by 3,682.9 points or 4.32%, while the broader NSE Nifty index has fallen by 1,080.95 points or 4.1%.
Historical trends
Market participants hope for post-Budget recovery
Santosh Meena, Head of Research at Swastika Investmart Ltd, noted that similar pre-budget trends in January have seen sharp falls followed by recoveries after Republic Day. He said market participants are hoping for a similar reversal this time around. Notably, the BSE benchmark had also fallen in January 2025 and previous years. Historically, January is a "weak" month, but a 4 % decline is well above normal seasonal weakness.
Market pressures
Geopolitical uncertainties and tariff concerns impact domestic equities
Ponmudi R, CEO of Enrich Money, an online trading and wealth tech firm, said geopolitical uncertainties and new tariff concerns have had a cascading effect on domestic equities. He added that a global risk-off environment has led to aggressive selling by foreign portfolio investors this month. This has further weighed down the rupee which hit record lows.
Investor caution
Crude oil prices, global bond yields add to risk aversion
Ponmudi further said high crude oil prices in international markets and rising global bond yields have added to risk aversion. This has kept investors on edge and strengthened a defensive stance as markets navigate an increasingly uncertain global macroeconomic and geopolitical landscape. The rupee hit a historic low of 92 against the US dollar on January 23, having depreciated over 2% this month alone.
Budget expectations
Union Budget 2026-27 to balance growth support and macro stability
Axis Securities has reported that considering global uncertainty, domestic growth resilience, and fiscal discipline, the Union Budget 2026-27 will strike a balance between supporting growth and ensuring macro stability. As per analysts, it is a good time to buy if you're a long-term investor (3-5+ years) and you are buying quality large-caps/index funds, not speculative names. Valuations have cooled after the January fall, making risk-reward better.