Indian Stock Market Falls for Third Straight Session: Four Key Factors Dragging Indices Lower

Domestic equity markets extended their losing streak for the third consecutive day on Wednesday, as sustained selling pressure, global uncertainties and weak cues from overseas markets weighed on investor sentiment. Over the last three sessions, the BSE Sensex has fallen by more than 1,100 points, while the Nifty 50 has slipped close to 1%.

What initially appeared to be a mild correction has now turned into a broader phase of weakness, with markets remaining in the red throughout the week. Analysts point to four major factors behind the ongoing decline.

1. Heavy Selling in Index Heavyweights

Persistent selling in large-cap stocks has played a crucial role in pulling the market lower. On Wednesday, shares of HDFC Bank declined 1.7%, while Reliance Industries slipped 0.4%. Trent also fell 1.4%. A day earlier, Trent had plunged 8.6% and Reliance had dropped nearly 5%, amplifying the pressure on benchmark indices.

Dr. V. K. Vijayakumar, Chief Investment Strategist at Geojit Investments, said the market currently lacks a clear trend or direction. “Movements in a few heavyweight stocks are disproportionately impacting the entire market,” he noted. He added that despite strong institutional buying on Tuesday, the Nifty still closed 71 points lower due to sharp declines in Reliance and HDFC Bank. High trading volumes in both cash and derivatives segments suggest settlement-related activity may also be influencing price movements.

2. Political Turmoil in Venezuela

Rising geopolitical concerns, particularly political upheaval in Venezuela, have further unsettled global markets. Uncertainty surrounding Venezuela’s vast petroleum reserves intensified after a US military operation on January 3 reportedly led to the arrest of President Nicolás Maduro and his wife in Caracas. They were subsequently taken to the US to face criminal charges, with Maduro currently lodged in a New York jail.

These developments have heightened concerns over geopolitical and policy risks. Dr. Vijayakumar warned that markets could remain volatile in the coming days as global events unfold. He also pointed out that former US President Donald Trump’s statements and policy decisions continue to influence markets, especially with an impending court ruling on his tariff policies. An adverse verdict could trigger sharp swings in global equities.

3. Weak Global Cues and Asian Market Sell-off

Indian markets mirrored weakness across Asian equities, which declined amid concerns over the Venezuela crisis and uncertainty around global energy supplies. Japanese markets led the regional losses, dragging down other Asian indices.

Sentiment in Tokyo was hit after China imposed restrictions on exports of dual-use items to Japan—goods that can have military applications. This move followed recent comments by the Japanese Prime Minister on Taiwan, further escalating regional tensions. Although a rally in industrial metals provided some support to commodity-linked stocks, overall risk aversion dominated trading.

4. Consolidation Phase and Volatility Risk

Technical indicators suggest the recent decline is part of a broader consolidation rather than the start of a long-term downtrend. However, near-term volatility risks remain elevated.

Jaikrishna Gandhi, Head – Business Development (Institutional Equities) at Emkay Global, noted that since 1991, the Nifty has witnessed seven major bull cycles, most lasting 40–55 months, followed by consolidation phases. Post-2009 corrections, he said, have been characterised more by time-based consolidation than sharp declines, reflecting the market’s structural strength.

According to Gandhi, the index has recently completed a consolidation phase of around 1–1.5 years, after which historical trends suggest a renewed uptrend. He sees potential upside towards 28,500, while key support lies in the 25,500–25,300 range. On a sectoral basis, he highlighted relative strength in the pharmaceutical sector.

Overall, analysts advise investors to remain cautious in the near term, as global developments and heavyweight stock movements are likely to keep markets volatile.