Indian Markets Bleed for 3rd Straight Week: Nifty Dips Below 25,000, FIIs Sell-Off Continues

Indian equity markets experienced their worst weekly performance in nearly two months during July 14-18, 2025, with benchmark indices declining for the third consecutive week. The selling pressure intensified as weak Q1 earnings results from key companies, persistent foreign institutional selling, and global trade uncertainties created a perfect storm of negative sentiment.

The Nifty 50 closed the week at 24,968 points, marking a weekly decline of approximately 181 points or 0.72%. This represented the index's breach below the psychologically important 25,000 level for the first time since early June. The Sensex settled at 81,758 points, registering a weekly fall of over 500 points.

The weakness was broad-based, with declining stocks significantly outnumbering advancing ones throughout the week. Market breadth remained negative as investors adopted a risk-off approach amid mounting concerns over corporate earnings quality and global macroeconomic headwinds.

Key market highlights included:

• Third consecutive week of losses for major indices

• Nifty's decisive break below 25,000 support level

• Banking sector leading the decline on earnings disappointments

• IT sector facing headwinds from muted demand environment

• Sustained FII selling pressure exceeding ₹16,000 crores for the month

Key Indices Performance

The benchmark indices showed remarkable resilience in the first half of the week but succumbed to selling pressure as earnings results from major companies disappointed investors. The Nifty's technical structure remained concerning as it closed below key moving averages, signalling potential further weakness.

Broader market performance was equally subdued:

• Nifty MidCap 100: Declined 0.70%, closing at 59,104 points

• Nifty SmallCap 100: Fell 0.82%, ending at 18,763 points

• Bank Nifty: Dropped 0.96% to close at 56,283 points

• Nifty IT: Marginal gain of 0.01% at 37,142 points

The India VIX, measuring market volatility, settled marginally higher at 11.39 points, indicating controlled but growing uncertainty among market participants.

Daily Performance Breakdown

• Monday, July 14: Markets opened on a weak note following disappointing TCS results announced over the weekend. The Sensex fell 247 points while the Nifty closed below 25,100 levels. Weak global cues from overnight US markets and concerns over Q1 earnings season amplified the negative sentiment.
• Tuesday, July 15: A brief recovery attempt was seen in the morning session, but gains were short-lived as investors remained cautious ahead of more earnings announcements. The markets ended with marginal losses as mixed global cues kept sentiment subdued.
• Wednesday, July 16: Markets managed modest gains of 0.08% on the Sensex and 0.06% on the Nifty in a choppy trading session. Recovery was led by select heavyweight stocks, though uncertainty around earnings and US-India trade negotiations kept gains limited. ITC Hotels and Network18 were among the standout performers following strong quarterly results.
• Thursday, July 17: Fresh selling pressure emerged as the IT sector declined 1.39% following disappointing earnings from major tech companies. The Nifty fell 0.27% while broader markets also declined modestly. Realty and pharma sectors showed some resilience.
• Friday, July 18: The week ended on a distinctly negative note with sharp declines across benchmarks. The Sensex plummeted 501 points (0.61%) while the Nifty fell 143 points (0.57%) to close below 25,000. Axis Bank's disappointing Q1 results and continued FII selling pressure weighed heavily on sentiment.

Sectoral Analysis

Top Performing Sectors

FMCG sector emerged as the standout performer during the week with gains exceeding 2%, driven by positive management commentary on urban demand recovery and strong rural consumption patterns. Key beneficiaries included:

Hindustan Unilever and other major FMCG companies showed resilience amid broader market weakness, supported by expectations of improved demand in the festive season ahead. The sector benefited from defensive buying as investors sought refuge in consumption-driven themes.

Pharmaceutical sector gained traction on defensive buying patterns and stable business outlook. Companies with strong domestic market presence and diversified product portfolios outperformed their peers.

Worst Performing Sectors

Information Technology sector bore the brunt of selling pressure, declining 3.76% following TCS's disappointing Q1 results. The sector faced multiple headwinds:

• Revenue decline in constant currency terms

• Muted client spending across key verticals

• Policy changes affecting decision-making timelines

• Weak revenue conversion despite strong order intake

Defence sector witnessed heavy profit booking with stocks like BEL, Data Patterns, and HAL declining sharply. The correction extended the sector's recent weakness as investors booked profits following the strong rally in previous months.

Banking sector performance was mixed but overall negative, with private sector banks showing relatively better resilience compared to PSU banks. The sector was impacted by concerns over asset quality and margin pressures.

Institutional Flows

Foreign Institutional Investors (FIIs)

FII activity remained overwhelmingly negative throughout the week, with sustained selling pressure across multiple sessions. Month-to-date FII outflows reached ₹16,956 crores by July 18, marking a significant reversal from the previous quarter's net buying trend.

The heavy selling was attributed to:

• Rising US bond yields making dollar assets more attractive

• Concerns over stretched valuations in Indian markets

• Global trade policy uncertainties

• Profit booking after the recent rally

Daily FII flows showed consistent selling pattern:

• July 17: Net outflow of ₹3,694 crores (heaviest single-day selling)

• July 16: Net outflow of ₹1,858 crores

• July 14: Net outflow of ₹1,614 crores

Domestic Institutional Investors (DIIs)

DIIs continued their supporting role, providing crucial market stabilisation through consistent buying. Month-to-date DII inflows reached ₹21,894 crores, effectively cushioning the impact of foreign selling.

The strong DII buying was driven by:

• Systematic Investment Plan (SIP) inflows from retail investors

• Insurance companies' regular investment schedules

• Mutual fund managers deploying fresh collections

• Long-term institutional mandates

This DII support has been instrumental in preventing deeper market corrections and maintaining overall stability despite foreign selling pressure.

Major Earnings Season Highlights

Reliance Industries: Stellar Performance

Reliance Industries delivered exceptional Q1 results, reporting a record consolidated net profit of ₹26,994 crores, up 78% year-on-year. The strong performance was driven by robust growth across consumer businesses and a one-time gain of ₹8,924 crores from the sale of Asian Paints stake.

Key highlights from RIL's results:

• Excluding exceptional items, profit growth remained healthy at 25%

• Revenue increased 5.11% to ₹2,43,632 crores

• Consumer businesses showed strong double-digit growth

• Jio Platforms net profit rose 25% to ₹7,110 crores

• Retail division net profit increased 28% to ₹3,271 crores

The results demonstrated the company's successful diversification strategy with telecom, retail, and petrochemicals all contributing positively to overall performance.

Mixed IT Sector Results

TCS led the disappointment in the IT space with Q1 revenue declining 3.3% sequentially in constant currency terms. Despite strong deal wins of $9.4 billion, revenue conversion remained weak due to:

• BSNL contract ramp-down impact

• Muted client spending environment

• Extended decision-making cycles

• Project deferrals across key verticals

Other major IT companies reported similar challenges:

• Wipro showed relative resilience with revenue declining 2% quarter-on-quarter

• Margins remained under pressure across the sector

• Growth guidance remained cautious for the coming quarters

The IT sector's challenges reflected broader global economic uncertainties and technology spending optimisation by clients.

Banking Sector Results Deep Dive

Axis Bank Disappoints

Axis Bank's Q1 results significantly missed Street expectations, leading to a sharp 4.5% decline in stock price on Friday. Key concerns included:

• Higher than expected slippages at ₹8,200 crores vs ₹4,805 crores in Q4

• Increased provisioning requirements

• Margin pressure from competitive environment

• Slower loan growth momentum

The bank's management attributed the higher slippages to a more prudent approach to asset recognition and one-time industry benchmarking exercises.

Positive Surprises

Several banking stocks delivered better-than-expected results:

Central Bank of India's strong performance was driven by improved asset quality with gross NPAs declining to 3.13% from 4.54% year-on-year.

Yes Bank's turnaround continued with stable asset quality and improved operational efficiency supporting the profit growth.

IT Sector Disappointment

The Information Technology sector faced its most challenging week in recent months, with the Nifty IT index declining 3.76%. The sector's weakness was primarily triggered by TCS's disappointing Q1 results, which set a negative tone for the entire space.

Key challenges facing the IT sector include:

Revenue Headwinds:

• Sequential revenue decline across major companies

• Client budget constraints affecting new project approvals

• Extended sales cycles due to macroeconomic uncertainties

• Delayed decision-making by enterprise clients

Margin Pressures:

• Increased onsite-offshore cost differentials

• Higher employee retention costs

• Pricing pressure in traditional service lines

• Investment requirements in emerging technologies

Demand Environment:

• Reduced discretionary spending by clients

• Focus on cost optimisation rather than growth initiatives

• Cautious approach by financial services clients

• Slower adoption of new technology projects

The sector's outlook remains challenging with most companies providing cautious guidance for the coming quarters. However, long-term fundamentals remain intact with digital transformation continuing to drive demand.

FMCG and Pharma Resilience

FMCG Sector Strength

The FMCG sector demonstrated remarkable resilience during the week's broader market decline, gaining over 2%. This outperformance was supported by several positive factors:

Urban Demand Recovery:

• Management commentary indicating pickup in urban consumption

• Improved distributor sentiment and channel restocking

• Festival season preparation driving inventory buildup

• Price stabilisation supporting volume growth

Rural Market Improvement:

• Normal monsoon forecast boosting rural sentiment

• Government rural employment schemes supporting incomes

• Agricultural commodity price stability

• Increased rural credit availability

Key sector beneficiaries included:

• Hindustan Unilever: Strong brand portfolio and distribution reach

• Nestle India: Premium product positioning and consistent growth

• Britannia Industries: Bakery segment leadership and expansion plans

The sector's defensive characteristics made it attractive to investors seeking stability amid broader market volatility.

Pharmaceutical Sector Performance

The pharmaceutical sector gained 0.7% during the week, supported by defensive buying and sector-specific positives:

Structural Growth Drivers:

• Increasing healthcare awareness and spending

• Generic drug opportunities in global markets

• Government initiatives supporting healthcare access

• Research and development investments yielding results

Near-term Catalysts:

• US FDA approval pipeline progress

• Domestic formulation market expansion

• Contract research and manufacturing growth

• Biosimilar product launches

The sector remains well-positioned for medium to long-term growth despite near-term volatility.

Global Factors and Trade Developments

US-India Trade Negotiations

Uncertainty around US-India trade negotiations continued to weigh on market sentiment throughout the week. Key developments included:

Trade Policy Concerns:

• Donald Trump's indication of "very close" trade agreement finalization

• India likely to face tariffs of less than 20% compared to other countries

• August 1 deadline creating urgency for resolution

• Market volatility expected until concrete outcomes emerge

The ongoing uncertainty has created a cautious investment environment, with investors preferring domestic consumption themes over export-oriented sectors.

Global Market Conditions

International markets showed mixed performance during the week:

US Markets:

• Continued concerns over Federal Reserve policy direction

• Mixed corporate earnings results

• Trade policy uncertainties affecting sentiment

• Technology sector facing regulatory scrutiny

Asian Markets:

• Cautious approach adopted by regional investors

• China's economic recovery pace remaining uncertain

• Currency volatility affecting cross-border flows

• Supply chain disruption concerns persisting

European Markets:

• Central bank policy divergence creating uncertainty

• Economic growth concerns amid trade tensions

• Energy sector volatility affecting broader indices

• Geopolitical developments influencing investor sentiment

These global factors combined to create a challenging environment for emerging market equities, including India.

Primary Market Activity

IPO Pipeline Remains Active

Despite the secondary market weakness, the primary market continued to show healthy activity with several companies proceeding with their public offerings:

Recently Closed IPOs:

• Anthem Biosciences: Mainboard IPO closed July 16

• Spunweb Nonwoven: SME IPO closed July 16

• Monika Alcobev: SME IPO closing July 18

Recent listings showed mixed performance:

• Smartworks Coworking: Listed with 6.88% gains on July 17

• Travel Food Services: Listed with 2.27% gains on July 14

• Glen Industries: Strong listing with 61.86% gains on July 15

The continued IPO activity indicates underlying confidence in India's long-term growth story despite near-term market volatility.

Corporate Actions and Dividends

Several companies announced significant corporate actions during the week:

Dividend Announcements:

• Shree Cements: Declared dividend of ₹600 per share (ex-date July 21)

• Orient Bell: Announced dividend of ₹5 per share

• Windlas Biotech: Dividend of ₹116 per share declared

Bonus Issues:

• Focus Business Solution: 29:50 bonus ratio (ex-date July 21)

• Jonjua Overseas: 1:20 bonus ratio

These corporate actions reflect companies' confidence in their cash generation capabilities and commitment to shareholder returns.

Top Gainers and Losers

Week's Best Performers

FMCG and pharma stocks dominated the gainers list as investors sought defensive plays amid broader market uncertainty:

The outperformance was driven by expectations of improved demand environment and defensive characteristics during uncertain times.

Major Laggards

Technology and banking stocks were among the worst performers following disappointing earnings and sector-specific challenges:

TCS faced headwinds from weak quarterly results while Axis Bank disappointed on asset quality parameters, leading to significant underperformance.

Defence sector stocks also witnessed heavy selling:

• BEL: Declined 2-3% during the week

• Data Patterns: Sharp correction from recent highs

• HAL: Profit booking pressure evident

The defence sector correction reflected investors booking profits after the sector's strong performance in previous months.

Week Ahead: July 21-25, 2025

Major Earnings Announcements

The coming week will be crucial for market direction with several heavyweight companies scheduled to announce their Q1 results:

Saturday, July 19 (Post-Market Hours):

• HDFC Bank: India's largest private sector bank

• ICICI Bank: Second-largest private lender

• Yes Bank: Continuing turnaround story

• Reliance Power: Focus on debt reduction and operational efficiency

Monday, July 21:

• Zomato (Eternal): Food delivery and quick commerce growth

• UltraTech Cement: Volume growth and pricing power

• Paytm: Path to profitability and regulatory clarity

Tuesday-Friday:

• Infosys (July 23): IT sector outlook and guidance

• Bajaj Finance (July 24): NBFC sector health check

• Bajaj Finserv (July 25): Insurance and financial services performance

Key Events to Monitor

Domestic Factors:

• Monsoon progress and its impact on rural economy

• Government policy announcements and budget preparations

• Corporate earnings trajectory and management guidance

• FII/DII flow patterns and market liquidity

Global Catalysts:

• US Federal Reserve policy meeting (July 29-30) preparations

• Trade negotiation developments with various countries

• Global crude oil price movements and energy costs

• Currency market stability and rupee performance

Sectoral Outlook

Defensive Sectors (Positive):

• FMCG: Demand recovery expectations and rural income improvement

• Pharma: Healthcare spending growth and export opportunities

• Utilities: Stable cash flows and dividend yields

Cyclical Sectors (Cautious):

• Banking: Earnings season critical for sentiment

• IT: Client spending environment remains challenging

• Auto: Waiting for festive season demand pickup

Investment Strategy for the Week

For Conservative Investors:

• Focus on large-cap defensive stocks with consistent dividend history

• Maintain higher cash allocation until market direction becomes clearer

• Consider systematic investment approaches rather than lump sum investments

For Aggressive Investors:

• Look for oversold quality stocks as potential buying opportunities

• Monitor earnings results closely for stock-specific trading opportunities

• Maintain strict stop-loss discipline given market volatility

Key Risk Factors:

• Disappointing earnings from major companies could trigger further selling

• Escalation in trade tensions may increase market volatility

• Global economic slowdown concerns affecting investor sentiment

• Currency instability impacting foreign investment flows

The week ahead will be pivotal in determining the short-term market direction, with earnings results from major banking and technology companies likely to set the tone for the broader market sentiment. Investors should remain cautious while selectively identifying opportunities in quality names with strong fundamentals.

Disclaimer: This analysis is based on market data and expert opinions available as of July 19, 2025. Past performance does not guarantee future results. Investors should conduct their own research and consult with financial advisors before making investment decisions.