Sensex declines 250 pts from day's high, Nifty below 25,950: 3 key reasons behind market paring gains

Sensex, Nifty see profit booking. 

The equity benchmarks gave up early gains on Monday as investors booked profits at higher levels, dragging the indices off their intraday peaks.

The Sensex, which had risen 720.2 points or 0.85 percent to a high of 84,932.08, pared most of those gains and was down around 250 points at 84,733.49 at around 2 pm. The Nifty also retreated from its day’s high of 26,005.95, falling below the 26,000 mark to 25,953.35.

Key factors behind the pullback

1) Profit booking: Selling pressure emerged in select heavyweights after the recent rally. Pharma stocks saw profit taking, while Bharat Electronics, Kotak Mahindra Bank, Bajaj Finance and Adani Ports and Special Economic Zone were among the major laggards in the Nifty pack, declining up to 2 percent.

2) Crude oil uptick: Global benchmark Brent crude rose 0.23 percent to USD 66.09 a barrel. Higher crude prices tend to raise India’s import bill and can add to inflation concerns, weighing on sentiment.

3) Rise in volatility index: The India VIX, which measures market volatility, climbed to 12.48, up 7.68 percent, indicating increased caution among investors.

On the technical front, Anand James, Chief Market Strategist at Geojit Financial Services, said the Nifty’s recent move suggests an early attempt to push higher.

“Though Friday’s recovery was stalled near VWAP resistance, the formation of a morning star pattern raises prospects of a return to the upside trajectory aiming 26,186. However, if the initial upswing fails to clear the 25,940-26,000 barrier, downsides may resume aiming 25,590-25,400,” he said.

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