Indian Stock Market Preview: Navigating Volatility on January 21, 2026

Introduction

The Indian equity markets enter the trading session on Wednesday, January 21, 2026, standing at a vital technical and psychological crossroads. Following a bruising session on January 20, where the Nifty 50 plummeted 353 points (1.38%) to close at 25,232, and the Bank Nifty shed 487 points (0.81%) to end at 59,404, the domestic indices have reached a 3.5-month low. For retail investors, this correction represents a significant shift in market structure as the benchmark indices have officially breached their long-term moving average supports.

While early indicators from GIFT Nifty suggest a marginally positive opening around the 25,300 mark, the underlying sentiment remains fragile. Global headwinds, particularly the aggressive tariff rhetoric from the United States and a spike in bond yields, continue to weigh heavily on investor confidence. This article provides a comprehensive breakdown of the technical levels, global cues, and specific stock actions that will define today's trading landscape.

Global Market Overview: A Sea of Red

Wall Street's Deep Correction

United States markets suffered their most significant one-day decline since October on Monday. The panic was fueled by President Trump's escalating tariff threats, including a proposed 10% tariff on European nations slated to rise to 25% by June 1, and a staggering 200% tariff on French wine and champagne. This, combined with geopolitical uncertainty surrounding territorial ambitions in Greenland, sent the VIX Index (often called the 'Fear Gauge') surging above the 20 mark for the first time since November.

Bond Market and Yield Spikes

The volatility is not limited to equities. The US 30-year Treasury yield jumped 8 basis points to reach a four-month high. Simultaneously, Japanese 30-year debt yields surged by over a 0.25 percentage point. Such movements in the bond market typically lead to capital outflows from emerging markets like India as dollar-denominated assets become more attractive.

Asian Markets Reaction

Tracking the overnight weakness from New York, Asian markets have opened predominantly in the red today:

• Japan Nikkei 225: Down 1.28%
• South Korea Kospi: Down 1.09%
• Hong Kong Hang Seng: Down 0.12%
• China CSI 300: Bucking the trend, up 0.11%

Expected Opening Sentiment

As of 6:46 AM IST, GIFT Nifty is trading at 25,293, representing a mild gain of 0.15%. This indicates a flat to marginally positive opening for the Indian bourses, with a premium of approximately 25-45 points over the Nifty futures' previous close.

However, data suggests that any opening gains may be met with selling pressure due to:

1. Technical Breakdown: Nifty is currently trading below its 200-day EMA.
2. Volatility: The India VIX has escalated to 12.70, up 7.63%, signaling heightened uncertainty.
3. FII Selling: Persistent selling by Foreign Institutional Investors remains a dominant theme.

Technical Analysis & Key Levels

Nifty 50: The Bearish Grip

The technical structure of the Nifty 50 is currently bearish, with the index trading below all its major exponential moving averages (20, 50, 100, and 200-day EMAs). The formation of a bearish candlestick on the daily chart suggests that the 'path of least resistance' is downward.

Critical Support & Resistance for Nifty 50:

Technical Note: The Relative Strength Index (RSI) stands at 29.27. While this indicates oversold conditions that could trigger a technical bounce, it does not confirm a trend reversal.

Bank Nifty: Range-Bound with Downward Bias

The Bank Nifty closed below its 20-day EMA at 59,404. The banking index is currently struggling to maintain its footing above the psychological 59,000 mark.

Key Levels for Bank Nifty:

• Support: 59,289 (Pivot), 59,122, and 58,900 (Lower Bollinger Band).
• Resistance: 59,571 (20-day SMA), 59,800, and the major 60,000 cluster.

Stocks to Watch: January 21, 2026

1. Persistent Systems (PERSISTENT) - Buy on Dip

Data Points: Reported a stellar Q3 with profit rising 17.8% YoY to ₹439.4 crore. Dollar revenue grew 17.3% to $422.5 million.
Brokerage View: Investec has hiked the target to ₹6,665, while UBS has set a target of ₹7,490 following an EPS beat and net new ACV of $256 million.

2. AU Small Finance Bank (AUBANK) - Buy on Dip

Data Points: Q3 profit surged 26.3% YoY to ₹667.6 crore. The bank continues to show robust growth momentum and healthy asset quality in the small finance segment.

3. JSW Energy (JSWENERGY) - Breakout Watch

Development: Its subsidiary signed a Power Purchase Agreement (PPA) for a 1,600 MW thermal power plant in West Bengal. This is a significant capacity addition to its generation portfolio.

4. IndiaMART InterMESH (INDIAMART) - Buy on Dip

Data Points: Q3 profit jumped 55.6% YoY to ₹188.3 crore, demonstrating the resilience of B2B e-commerce platforms.

5. HDFC Bank (HDFCBANK) - Sell on Rise

News: RBI approved the re-appointment of Kaizad Bharucha as Deputy MD for 3 years. Despite this continuity, the stock fell 4% in the previous session. Resistance is expected on any recovery attempts.

6. Dr. Reddy's Laboratories (DRREDDY) - Earnings Watch

Event: The company is scheduled to announce its Q3 FY26 results today. As a pharma bellwether, its results will dictate the movement of the entire healthcare sector.

7. Hindustan Petroleum Corporation (HPCL) - Earnings Watch

Event: Q3 results are due today. Investors will closely monitor refining margins and the impact of fluctuating crude oil prices.

Other Notables:

• United Spirits: Q3 profit up 24.8% to ₹418 crore.
• Vikram Solar: Q3 profit grew 5-fold to ₹98.1 crore.
• Supreme Petrochem: Avoid — profit plunged 57.7% to ₹30.1 crore.
• Shoppers Stop: Weakness — profit declined 69.1% to ₹16.12 crore.
• F&O Ban: SAIL and Sammaan Capital are under the ban as contracts crossed 95% of market-wide position limits.

Events & Economic Calendar

Earnings Releases (Q3 FY26)

Today is a heavy day for corporate scorecards. Major announcements include:

• Pharma: Dr. Reddy's Laboratories
• Energy/OMC: HPCL
• Cement: Dalmia Bharat
• Banking/Finance: Bank of India, PNB Housing Finance, UTI AMC
• Infrastructure/Others: Tata Communications, KEI Industries, Bajaj Consumer Care

Geopolitical Focus: Trump at Davos

President Trump is scheduled to attend the World Economic Forum in Davos this evening (IST). Markets are on edge regarding potential policy announcements on global tariffs, US-China relations, and his specific rhetoric regarding Greenland. Any aggressive stance could trigger immediate volatility in global futures.

Derivatives Expiry

We are approaching the January 22 Weekly Options Expiry for the Nifty 50.

• Max Put Open Interest: 25,000 strike (Acts as a floor).
• Max Call Open Interest: 26,000 strike (Acts as a ceiling).

Trading Strategy & Recommendations

Overall Stance: SELL-ON-RISE

Given the technical breakdown and global uncertainty, historical trends indicate that aggressive buying should be avoided. A defensive approach is warranted.

Nifty 50 Intraday Setups:

1. Setup A: Sell Nifty Futures near 25,350 | Target: 25,060 | Stop Loss: 25,500.
2. Setup B: Sell near 25,340 | Target: 25,090 | Stop Loss: 25,541.

Bank Nifty Intraday Setups:

1. Setup A: Sell near 59,600 | Target: 59,190 | Stop Loss: 59,800.
2. Setup B: Sell near the 20-day SMA (59,571) | Target: 59,184 | Stop Loss: 59,800.

Positional Strategy:

Investors may consider monitoring quality stocks reporting strong earnings (e.g., Persistent Systems, AU Bank) for long-term accumulation on significant dips. However, avoid stocks with weak earnings like Shoppers Stop or Supreme Petrochem, and those on extended losing streaks like DLF (down 10 sessions).

Key Takeaways for Investors

• Volatility Management: With the India VIX up 7%, traders should reduce position sizes by 30-40% to manage risk.
• Critical Support: The 25,160 (200-day EMA) level is the 'line in the sand.' A sustained breach below this could accelerate a decline toward 24,800.
• Safe Havens: Gold has hit fresh record highs, and Silver prices are soaring, benefiting producers like Hindustan Zinc (+2.92%).
• Sector Rotation: IT (selective) and Metals are showing relative strength, while Banking and Retail are underperforming.

What This Means for Investors

Historical trends indicate that when a market breaks below its 200-day EMA, it often enters a period of consolidation or further correction before a new uptrend is established. This is not necessarily a signal to panic, but rather a signal to be more selective. Retail investors should focus on companies with high earnings visibility and robust cash flows. Monitoring the Davos summit tonight is essential, as trade policy is currently the primary driver of global equity risk.