Is today's fall a healthy pullback or are markets heading lower? Here's what experts say

Sensex, Nifty declined 1 percent on Tuesday dragged down by profit taking.

The benchmark equity indices extended losses for the third straight session on Tuesday, with the Sensex and Nifty falling over 1 percent, dragged down by profit-booking in heavyweight stocks, rising global bond yields and concerns over resurgence in Covid cases.

The Sensex dropped 872.98 points or 1.06 percent to close at 81,186.44. It had opened on a positive note but soon turned lower, hitting an intraday low of 81,153.70. Only three of the 30 Sensex stocks ended in the green while the rest declined, with autos, financials, and defence stocks bearing the brunt of the selling.

The broader Nifty also came under pressure, slipping 261.55 points or 1.05 percent to end at 24,683.90.

With Tuesday’s fall, both indices have now declined for three consecutive sessions. This has raised a key question for investors: Is this a healthy pullback after a strong run-up, or are markets signaling a deeper correction ahead?

Devarsh Vakil, Head of Prime Research at HDFC Securities, said the sharp decline came amid a combination of domestic and global cues. "Markets were spooked by rising Covid-19 cases in Southeast Asian countries such as Singapore and Hong Kong. At the same time, bond yields have firmed up globally, especially in Japan, where a sell-off has driven borrowing costs higher. This is weighing on sentiment across the board," he said.

Vakil added that traders were also closely watching the outcome of India-U.S. trade discussions, which added to market uncertainty.

"Technically, Nifty has closed below its 5-day exponential moving average (EMA) for the first time since May 8. This suggests that traders may be shifting their stance from buying the dips to booking profits. Key support levels are now seen at 24,494 and 24,378, while resistance is expected in the 24,800 to 24,900 range," he said.

In a similar view, analysts at Bajaj Broking said the Nifty has formed a sizable bearish candle on the daily chart, marked by a lower high and lower low pattern, signalling the continuation of a corrective phase.

"We expect the index to move into a consolidation zone between 24,400 and 25,200 in the near term. This would help cool off the overbought readings seen on the daily stochastic oscillator after the recent strong rally," Bajaj Broking said in a note.

The brokerage further noted that the 24,350–24,400 zone will be crucial in the coming sessions, as it coincides with the prior week’s low, the 20-day EMA, and the 61.8 percent Fibonacci retracement level of the rally from 23,935 to 25,116.

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