Bulls Appear to Be on the Ropes as Volatility and Uncertainty Dominate
Vijay L Bhambwani's latest Ticker newsletter paints a cautious picture for Indian financial markets, emphasizing that the near future is characterized by volatility, uncertainty, complexity, and ambiguity (VUCA). In his analysis dated 25 January 2026, the seasoned trader with experience since 1986 warns that retail traders risk punitive capital losses if they take current market conditions lightly.
Geopolitical and Economic Factors Driving Market Nervousness
Geopolitics, economics, modern money-market theory, and realpolitik are keeping financial markets on edge. Trump's moves on Iran and Cuba are expected to occupy top-of-the-mind shelf space for traders this week, with the US seemingly pushing for regime changes in both nations. This has unnerved markets, triggering volatility.
Last week, oil prices flared up in late trade as military action appeared imminent in Iran, with possible intervention in Cuba. Gas prices spiked due to a polar vortex, although the flare-up was temporary. Inflation hawks were spooked, leading to equity sell-offs. A new low in the rupee versus the US dollar exacerbated nervousness, raising concerns about imported inflation and higher costs of funds.
Sectoral Focus and Market Performance
Banking and financial sector stocks, with a 36.56% weightage in the Nifty 50, dragged markets lower, as predicted in Bhambwani's previous analysis. The Bank Nifty led the decline, while the Nifty 50 followed. Public sector undertakings (PSUs) and banks remain sectors to watch due to their significant weightage.
Other key observations from last week include:
- A weak dollar index (DXY) spiked bullion prices due to safe-haven buying.
- Oil and gas prices rose on geopolitics and weather events.
- The rupee fell against the dollar despite dollar weakness.
- Indian 10-year sovereign bond yields fell, cushioning the Bank Nifty's decline.
- The NSE lost 3.54% in market capitalisation, indicating a broad-based fall.
Retail Risk Appetite and Technical Indicators
Bhambwani uses a simple yardstick to measure retail traders' conviction levels: where they deploy their money. Last week, turnover contribution in the high-risk, capital-intensive futures segment rose, mostly due to trade rollovers ahead of expiry. In the options segment, turnover contribution rose for higher-risk stock options, indicating overall higher risk appetite.
Technical analysis reveals:
- NSE advance-decline ratio improved marginally to 0.85 (from 0.74), but buying conviction remains below the bare minimum for a convincing rally.
- Market-wide position limits (MWPL) fell routinely ahead of expiry, with a need to watch for falls below recent post-expiry lows indicating nervousness.
- Impetus indicator showed higher selling pressure in Bank Nifty compared to Nifty 50.
- LWTD indicator fell to -0.57, the lowest in the chart period, suggesting weak fresh buying support.
Nifty's Outlook and Trading Strategies
The weekly Japanese candle chart shows a prominent bearish power candle, with price falling convincingly below the 25-week moving average. This signals nervousness, especially for leveraged traders. Last week's support level of 25,400 was breached by a wide margin, indicating further weakness. Sustained closing above 25,750 is needed to reverse near-term sentiments.
Bhambwani estimates this week's ranges at 59,550–57,400 for Bank Nifty and 25,525–24,575 for Nifty. He advises:
- Trade light with strict stop losses.
- Avoid leveraging at all costs.
- Deploy tail risk (Hacienda) hedges as a prudent strategy.
- Fixed-income investors should wait for better-yielding opportunities.
In the long term, Bhambwani remains optimistic for patient, long-term delivery investors, but cautions that the current environment requires vigilance and disciplined risk management.
