Indian benchmark indices Sensex and Nifty began trading on a weak note on Friday, July 18, 2025, pulled down by a combination of weak earnings from Axis Bank, heavy foreign institutional investor FII selling, and a cautious start to the July earnings season.

Indices Drop in Early Trade

At the open, the BSE Sensex fell 185.67 points to 82073.57, while the NSE Nifty dropped 45.4 points to 25066.05. This followed a similarly weak close on Thursday when the indices lost 0.4 to 0.45 percent.

The weakness in banking shares—led by Axis Bank, which tumbled nearly 5 percent—was the biggest drag on sentiment.

Axis Bank Results Shock the Market

Axis Bank released its Q1 FY26 results, reporting a 3 percent decline in consolidated net profit to 6243.72 crore. The drop was attributed to policy changes in its non performing asset NPA and loan upgrade calculations, which led to deterioration in reported asset quality.

According to Devarsh Vakil, Head of Prime Research at HDFC Securities,
Axis Bank’s latest financial results fell short of market expectations. The decline in asset quality was notable, and the market reacted accordingly.

On Thursday, Axis Bank’s Global Depository Receipts GDR also fell 4.8 percent to 64.30 USD, reflecting global investor discomfort.

Other Losers and Gainers

Apart from Axis Bank, other top laggards included:

• Bharti Airtel

• Kotak Mahindra Bank

• Eternal

• Tech Mahindra

Meanwhile, Power Grid, Mahindra and Mahindra, Tata Steel, and Tata Motors managed to trade in the green, defying the broader market weakness.

FII Selling Hits Market Sentiment

One of the key reasons behind the current market decline is the aggressive equity selling by FIIs, who offloaded shares worth 3694.31 crore on Thursday, July 17.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted a visible trend:
There is a clear pattern in FII activity this year. They were net sellers for the first three months, turned buyers for the next three, and now July shows a return to selling unless reversed by strong earnings or policy support.

He also highlighted that India is underperforming global markets, with Nifty down 1.6 percent in July so far.

Global Markets – Mixed Cues

In the Asian markets, cues remained mixed:

• South Korea’s Kospi and Japan’s Nikkei 225 traded lower

• Shanghai Composite SSE and Hong Kong’s Hang Seng were up

US markets closed on a positive note on Thursday.

Brent crude oil, the global benchmark, was flat, trading at 69.49 USD per barrel, down marginally by 0.04 percent.

Market Outlook – July's Underperformance Stands Out

So far in July 2025, the Indian stock market has underperformed its global peers. Analysts attribute this not only to the FII outflows but also to mixed Q1 earnings and valuation concerns.

Key Drivers Going Forward

• More Q1 earnings releases, especially from ICICI Bank, Infosys, and HUL

• Macro indicators like inflation, IIP, and external trade

• Global cues, especially from the US Fed and China

• Currency movements INR versus USD

Sector View – Banking Stocks Under Pressure

The banking sector, which has been the backbone of the recent rally, now seems to be showing early signs of weakness. With Axis Bank disappointing, and caution expected around Kotak Mahindra Bank and Yes Bank’s upcoming results, traders are expected to remain risk averse.

Investor Sentiment – Stay Cautious, Say Experts

Analysts believe that while the medium to long term view remains positive, in the short term, investors should brace for increased volatility and potentially range bound movement in both Sensex and Nifty.

VK Vijayakumar adds
We may need to see a strong trigger either in the form of robust earnings, policy stimulus, or easing global tensions for FIIs to return meaningfully. Until then, traders should follow a cautious approach.

Conclusion – Watch the Earnings and FII Data Closely

As of now, the Sensex and Nifty are struggling to hold key psychological levels amid weak banking results and sustained FII exits. Whether domestic institutional investors DIIs can step in to support the market will be crucial over the next few sessions.

Investors are advised to watch out for earnings from major private banks, global sentiment shifts, and most importantly, FII behaviour, which continues to dominate market direction.

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