Sensex closes 550 pts lower from day's high, Nifty ends below 25,700: Profit booking, other key reasons behind markets trimming gains

Sensex falls 400 pts from day's high, Nifty below 25,750: Three reasons behind markets paring gains

• Sensex and Nifty gave up most of the gains after hitting record highs on January 16
• Profit booking and FII selling weighed on market sentiment
• Investors await Q3 results from Reliance, ICICI Bank, and HDFC Bank

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Benchmark indices Sensex and Nifty partially gave up their gains on January 16 after briefly reclaiming strong milestones. Sensex fell 550 points from day's high after it rose above 84,000-mark while Nifty saw profit booking after hitting 25,850 level and closed trading below 25,700 level.

At 3:30 pm, the Sensex closed 187 points or 0.23% at 83,570.35, and the Nifty was up 28.75 points or 0.11% at 25,694.35. About 1,770 shares advanced, 2,111 shares declined, and 132 shares were unchanged.

Cipla, Eternal, Sun Pharma were among top losers on the Nifty 50 index.

Reasons behind fall:

1) Profit Booking

With markets rising strongly after two-day fall, a mild intraday profit booking was seen on the indices with investors awaiting further cues from Q3 results of Reliance Industries, ICICI Bank, HDFC Bank. RIL results will be announced in post-market hours of January 16 while ICICI Bank and HDFC Bank results will be out on January 17.

Bank Nifty also saw mild profit booking as it fell below the 60,000-level after reclaiming the milestone after four days.

Earlier in the day, Sensex crossed 84,000-level on the back of strong Infosys Q3 results, following which the IT major's shares rose over 5% and Nifty IT hit three-week high by climbing 3%.

2) US Supreme Court overhang

The US Supreme Court didn’t rule on challenges to President Donald Trump’s tariffs Wednesday, leaving the world to wait until at least next week to learn the fate of his signature economic policy.

A US Supreme Court ruling on Donald Trump's tariffs, which could have led to sharp volatility in global markets, didn’t materialise and since there is no timeline for a ruling such an event is unlikely to influence the market in the near-term, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

3) FII selling

Foreign Institutional Investors (FIIs) have been net sellers throughout January, extending outflows and weighing on broader market sentiment were net sellers of Rs 4,781 crore in Indian equities on January 14. Domestic Institutional Investors (DIIs) were net buyers of Rs 5,217 crore on the same day.

The increasing short positions being built by FIIs indicate that sustained FII selling is likely to be the near-term trend, till such time we have a trend reversal triggered by positive news or events. For long-term investors, the directionless weak drift in the market provides opportunities to slowly accumulate high quality growth stocks available at fair valuations.

Technical View

"In terms of support levels, the next critical threshold is identified in the 25,500-25,450 range, which is expected to cushion any shortcomings. Conversely, the intermediate resistance level is established around 25,800, followed by a higher resistance zone between 25,900 and 25,950 (conjuncture of 50 and 20 DEMA). Careful observation of these levels will be essential for informing future strategic decisions. Moving forward, it is imperative to remain attentive to developments regarding tariff concerns, as these are expected to be the most significant catalysts shaping market trends. Furthermore, domestic earnings reports will likely present opportunities for advancements in stock-related activities," said Osho Krishan, Chief Manager -Technical and Derivative research at Angel One.