Equity benchmark indices Sensex and Nifty declined over 1 percent on Wednesday after a seven-session rally, as investors resorted to profit booking amid lack of clarity on US tariff policies.
Sensex, which opened on a firm note, touched an intraday high of 78,167.87, gaining 150.68 points. However, selling pressure in select heavyweight stocks dragged the index down by 822.97 points or 1.05 percent to a low of 77,194.22.
The NSE Nifty slipped below the crucial 23,500 mark, hitting a low of 23,451.70, down 216.95 or 0.91 percent after rising 67.85 points to 23,736.50 in early trade.
Among the laggards, Tech Mahindra, NTPC, Cipla, Axis Bank, and Dr Reddy’s Laboratories weighed on the indices.
Key Factors Behind Market Decline:
1) US Tariff Concerns: Investors remained cautious amid uncertainty over the US trade policy. US President Donald Trump has promised a sweeping tariff announcement on April 2, referring to it as a “Liberation Day” against trading partners he has accused of unfair trade practices. "There will be some exceptions, but not too many," Trump said in a recent interview. This lack of clarity has unsettled global markets, including India.
2) Profit Booking: After a sharp rally over the past week, investors opted to book profits, leading to a pullback. "The market is witnessing profit booking at higher levels after a strong uptrend. However, the overall short-term structure remains positive," said Shrikant Chouhan, Head of Equity Research at Kotak Securities.
3) Rupee Weakness: The Indian rupee depreciated by 6 paise to 85.78 against the US dollar in early trade, weighed down by weak domestic equities and a strengthening greenback. Forex dealers cited liquidity constraints, concerns over reciprocal tariffs, and month-end dollar demand from importers as factors pressuring the rupee. On Tuesday, the currency snapped its seven-session winning streak, closing 11 paise lower at 85.72 per dollar.
4) Rising Crude Prices: Oil prices climbed on Wednesday on concerns of tighter supplies after U.S. President Donald Trump threatened tariffs against countries importing oil and gas from Venezuela. Crude price movements have a direct impact on Indian stocks, as India is a net importer of crude oil. Oil prices inched higher driven by US sanctions on Iran and anticipation of a drop in US crude inventories.
Vinod Nair, Head of Research at Geojit Investments noted that the market experienced profit booking after the recent gains, on the back of next week's US tariff announcements. The sectors with higher exposure to the US market, like pharma & IT, have witnessed some selling pressure.
Technical View
The Nifty has extended its correction as it has fallen below the support level of 23,600, leading to a decline towards 23,400.
Rupak De, Senior Technical Analyst at LKP Securities, noted "On the smaller time frame, the index has dropped below the near-term moving average. The trend looks bearish, with a negative crossover in the RSI (14) on the hourly time frame. On the lower end, support is placed at 23,300, up to which the current decline might extend. However, any fall below 23,300 might raise questions about the recent sharp rally from 21,964. Resistance is placed at 23,550, above which sentiment might improve."
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