70% of Nifty 500 stocks in red in Jan 2026: What's next for Indian markets?
Indian stock markets start 2026 on a weak note, with 70 per cent of Nifty 500 stocks in red amid FII selling, global uncertainty, and tariff worries
 "70% of Nifty 500 stocks in red in Jan 2026: What's next for Indian markets?")
Indian stock markets have carried their global uncertainty-related nervousness into calendar year 2026 (CY26), with most Nifty 500 stocks nursing losses thus far in January.
According to ACE Equity data, as many as 70 per cent of the Nifty 500 stocks have yielded negative returns till January 13, 2026. This is the second-worst performance by the pack during this period over the last five years since CY20.
Earlier, in CY25, up to 88 per cent of Nifty 500 stocks were in red during the corresponding period versus 50-75 per cent of Nifty 500 stocks that eked out gains in CY20, CY21, and CY22.
At the index level, the Nifty 500 index has slipped 1.6 per cent so far in January 2026 while the benchmark Nifty 50 index is down 1.5 per cent.
With this, the Indian markets have also extended their underperformance vis-a-vis global peers so far in January 2026. US indices like the S&P 500 have gained nearly 2 per cent till January 12 while Japan’s Nikkei index in Asia has posted year-to-date (YTD) returns of more than 6 per cent.
“This divergence reflects heavy foreign institutional investor (FII) selling, US tariff threats, and global trade uncertainty, along with artificial intelligence (AI)-driven rallies and policy support benefitting the US and select Asian markets,” said Devarsh Vakil, head of Prime Research, HDFC Securities.
Tepid market breadth in 2026
As many as 348 stocks from the Nifty 500 index have declined so far in January, with Godfrey Phillips stock being the worst hit. The scrip is down 20 per cent to date.
ITC, Elecon Engineering, Tejas Networks, Signatureglobal (India), Cohance Lifesciences, NBCC (India), Ather Energy, Jupiter Wagons, Schneider Electric Infrastructure, and GE Vernova T&D India are some of the other prominent laggards, having dropped in the range of 13-17 per cent during the period.
Additionally, over 60 per cent or 302 out of the Nifty 500 stocks have broken their long-term 200-day moving average (200-DMA) on the technical chart, suggesting caution among investors.
In general, stocks trading below 200-DMA are said to be trading with a negative bias. This long-term indicator is used to determine the trend for an underlying stock or index.
Another key technical indicator — the Relative Strength Index (RSI) — shows that 8 per cent or 40 stocks from the Nifty 500 index are trading in the “oversold” territory.
On a scale of 0-100, a reading below 30 is considered as “oversold” while a reading above 70 is said to be “overbought” on a 14-day RSI indicator.
Road ahead
According to Vakil of HDFC Securities, Indian equity markets have largely discounted the prevailing negatives, and are looking forward to the Union Budget 2026-27, and the earnings for the third quarter of 2025-26 (Q3FY26) to revive sentiment, with hopes skewed more towards the latter.
“Markets have tempered expectations from the Q3 earnings season, anticipating modest growth amid persistent sectoral headwinds. Sustained earnings momentum, however, could catalyse a decisive turnaround in market sentiment, fostering renewed investor confidence,” Vakil said.
In fact, in the absence of any unforeseen problems — particularly from global shocks — markets are setting up for an earnings growth-led recovery in the near term, he added.
As for the Budget, analysts believe continued tax certainty, capital expenditure push, an MSME-aid package, and potential tax incentives (possibly on capital gains) may lift market sentiment, but fiscal constraints limit the scope of any major stimuli.
"A tactical improvement in market sentiment is possible, but a sharp, sustained reversal in breadth is unlikely without earnings upgrades. The Union Budget, typically, drives sector rotation rather than a market-wide lift, benefiting capex-linked, defence, railways, or rural themes selectively. Meanwhile, Q3 results so far indicate resilience in pockets like banking and select defensives, but they have not been strong enough to change aggregate earnings expectations," said Sonam Srivastava, founder and fund manager at Wright Research PMS.
Thus, unless results surprise meaningfully on margins or demand commentary, any recovery is likely to remain narrow and sentiment-driven, she added.
Analysts think markets are transitioning into a phase where returns will be lower, but more fundamentally grounded. Investors, they suggested, need to reset their expectations as the market is in the process of rebuilding its base before the next durable trend emerges.