Indian equity markets are set to resume trade today following the Republic Day holiday, facing a **cautious to bearish** outlook fueled by a sharp correction and escalating pre-Budget volatility. Sentiment remains weak as benchmark indices enter the critical Budget week. *** Market Correction and Recent Price Action The past week saw significant distribution, with both headline indices posting sharp declines. The Nifty 50 closed the last trading session down **241.25** points, or **0.95%**, settling at **25,048.65**. Simultaneously, the BSE Sensex tumbled by **769.67** points, ending at **81,537.70**, a **0.94%** drop. This downward pressure confirms a significant pullback from recent highs. The Nifty has suffered a steep correction of over **5%** in just **11** trading sessions. The market slide has been broad-based, with Midcap and Smallcap indices underperforming the frontlines, signaling a risk-off environment across the capital market spectrum. Banking and financial services were major weak spots, with the Nifty Bank index declining by **1.23%** to **58,473.10**. Selling was pronounced in heavyweight stocks, with several index leaders witnessing sharp monthly cuts—for instance, one major industrial stock dropped nearly **12%** and a prominent banking stock fell **7.58%** in January alone. *** Elevated Volatility and Fund Flows Volatility has surged dramatically ahead of the Union Budget 2026-27 announcement. The India VIX, the market’s fear gauge, surged by nearly **25%** last week, reflecting high investor anxiety and expectations for sharp price swings. The VIX level hovering near **14.2** confirms that market participants are actively hedging against potential negative surprises. This elevated VIX indicates that high trading volatility will define the coming sessions. Sustained selling pressure from Foreign Institutional Investors (**FIIs**) remains a major overhang. FIIs have been continuous net sellers, with significant daily outflows exceeding **₹4,000 crore** in recent sessions. This heavy foreign outflow has contributed to the weakening rupee, which recently touched a historic low of **92** against the US dollar. Conversely, consistent buying from Domestic Institutional Investors (**DIIs**) has provided crucial counter-support, preventing a deeper market correction. *** Technical Outlook and Key Levels Technically, the indices display weakness. The Nifty has slipped below its crucial **200-day** Exponential Moving Average, a bearish signal not seen in many months. For the week ahead, the immediate downside risk is defined by the first major support zone for the Nifty, placed around **24,800** to **24,710**. A breach below this level could accelerate the descent towards **24,600**. On the upside, immediate recovery attempts will face stiff resistance. The **25,400–25,450** band is now seen as the key technical hurdle. Only a sustained closing above the higher resistance level of **25,500** would signal a shift in the short-term negative bias. Similarly, Bank Nifty is battling to hold the **58,200** mark. Resistance for the banking index is clustered around **59,300** to **59,400**. *** Budget 2026: The Central Catalyst The immediate focus for the market is entirely on the Interim Budget, expected on February **1st**. This event is the primary driver of volatility. Investors anticipate the government will prioritize fiscal discipline while also injecting measures to support consumption and growth, likely balancing macro stability with growth initiatives. Market expectations are centered on potential relief concerning income tax, possible customs duty realignments, and a continued focus on capital expenditure in infrastructure. With Q3 corporate earnings commentary being mixed and global geopolitical concerns persisting, the Budget narrative is critical. Traders are currently adopting a cautious, range-bound strategy, anticipating substantial price movements immediately after the government’s presentation.