Bear attack after three days: Sensex settles 500 pts lower, Nifty ends below 25,650; 7 key factors behind market decline

Stock market today news: Sensex, Nifty see profit booking in trade.

• Sensex and Nifty fell sharply, ending a three-day rally amid weak global cues.
• Metal stocks fell, sector index dropped 2% due to global price decline.
• Markets cautious ahead of RBI policy decision; volatility remains elevated.

Did our AI summary help?

The benchmark equity indices Sensex and Nifty fell sharply on Thursday, snapping a three-day rally, amid weak global cues and selling pressure in metal shares.

The Sensex dropped 503.76 points or 0.6 percent to settle at 83,313.93. During the day, it tanked 666.07 points or 0.79 percent to 83,151.62. The Nifty declined 133.20 points or 0.52 percent to end at 25,642.80.

The sell-off was broad-based, with mid-cap and small-cap stocks also coming under pressure. The Nifty midcap100 index fell 1 percent, while the Nifty smallcap100 index declined 1.5 percent.

Hindalco Industries, InterGlobe Aviation and Tata Motors Passenger Vehicles were among the major laggards in the Nifty50 pack, declining up to 4 percent, while Hindustan Unilever and State Bank of India were the top gainers, rising up to 2 percent. Market breadth was negative as bout 1368 shares advanced, 1997 shares declined and 159 shares unchanged.

Key factors behind market decline

1) Selling in metal shares: Metal stocks led the losses, with the sectoral index sliding nearly 2 percent, tracking a fall in global metal prices as stronger dollar makes commodities more expensive for holders of other currencies. The metal index had gained about 6 percent over the past three sessions.

2) Profit booking: Markets witnessed profit-booking after recent gains triggered by optimism over India-US trade deal. Most sectoral indices were trading in the red, barring IT and PSU banks. The IT index edged higher after a sharp fall of nearly 6 percent in the previous session amid concerns over AI-led disruption in the software industry after Anthropic launched its AI automation tools.

"There are a few near-term market trends that are significant. The Nifty appears to be in a consolidation phase without big moves at the index level. However, there are big changes within the Nifty stocks with big declines in IT stocks consequent to the IT sell-off in the US spreading to India, too," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Stock Market LIVE Updates

3) Weak global cues: In Asian markets, South Korea’s Kospi plunged over 3 percent, while Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng were also trading lower. US markets ended mostly in the red on Wednesday, with the Nasdaq Composite tumbling 1.51 percent and the S&P 500 falling 0.51 percent, although the Dow Jones Industrial Average rose 0.53 percent. Wall Street futures were also trading lower.

4) Thin FII buying: Foreign institutional investors (FIIs) were marginal net buyers, purchasing equities worth Rs 29.79 crore on Wednesday. The inflows were significantly lower compared to Tuesday’s buying of Rs 5,236.28 crore.

5) RBI MPC jitters: Markets were cautious ahead of the outcome of the Reserve Bank of India’s monetary policy meeting. The six-member Monetary Policy Committee, headed by RBI Governor Sanjay Malhotra, began its deliberations on Wednesday. The policy decision will be announced on Friday morning. According to an SBI study, the central bank is expected to maintain status quo on interest rates.

"The market direction is likely to depend on RBI's upcoming policy announcement and commentary as well as the details on the newly unveiled trade deal with the US," Bajaj Broking said in a note.

6) India VIX in green: India Vix, which measures near-term volatility and reflects investor fear, was trading higher at 12.28. A rise in the volatility index indicates increased nervousness among market participants and often leads to sharp intraday swings.

7) Expiry day moves: Markets were also volatile as Thursday marked the Sensex derivatives expiry. Expiry days typically see heightened volatility due to the unwinding and rollover of positions, leading to sharp movements in benchmark indices.

The Sensex and Nifty have gained about 3.8 percent over the past three sessions, supported by optimism over the trade agreement with the US that reduced tariffs on Indian goods.

Technical outlook 

The index formed a bullish candlestick pattern on the daily chart; however, selling pressure may emerge at higher levels. India VIX remains above 12, indicating elevated volatility in the near term. The short-term trend remains bearish and will turn bullish only on a sustained move above 25,300. The 9-day SMA is placed at 25,185. - FundsIndia Equity Research Desk

"Our view is that, on the upside, the key resistance levels are around 25,800/83900 or the 50-day Simple Moving Average (SMA). If the index manages to trade above these levels, it could potentially rise to 25,900–26,000/84200-84500. On the downside, if the market falls below 25,600/83100, it could decline to the 25,500–25,350/82800-82500 range. Currently, the market exhibits a non-directional character; therefore, level-based trading would be the ideal strategy for day traders," added Shrikant Chouhan, Head Equity Research, Kotak Securities.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.