Sensex settles nearly 700 pts lower from day's high, Nifty ends below 25,500: Three reasons behind sharp market decline

Sensex settles nearly 700 pts lower from day's high, Nifty ends below 25,500: Three reasons behind sharp market decline

• Sensex and Nifty trimmed gains amid profit booking on Feb 25
• FII selling resumed with Rs 102 crore equity outflows
• Nifty trading below 25,600; technical resistance at 25,670

Did our AI summary help?

Benchmark indices Sensex and Nifty significantly fell from day's highs on February 25 amid massive profit booking and closed marginally higher.

Sensex closed 50.15 points or 0.06% higher at 82,276.07, and the Nifty climbed 57.85 points or 0.23% at 25,482.50. About 1,966 shares advanced, 2,064 shares declined, and 161 shares were unchanged. Sensex fell nearly 700  points from day's high while Nifty ended below the psychologically important 25,500-mark. Sensex touched intraday high of 82,957.91 while that of Nifty was 25,652.6.

Eleven of the 16 major sectors logged gains. The broader small-caps and mid-caps rose 0.9% and 0.6%, respectively.

Metals gained 2.7%, led by Tata Steel, JSW Steel and Jindal Steel on price-target hikes by CLSA, citing gains from the recent imposition of a safeguard duty and the rise in steel prices.

The IT index advanced 1.6% after a 4.7% fall a day earlier. Rapid developments in AI are spurring questions about the long-term outlook for India's IT sector, even as executives frame disruption as an opportunity.

"While IT companies' valuations have turned attractive after the recent drop, investors will stay cautious because AI's impact on earnings growth and margins remains uncertain," Amnish Aggarwal, director of institutional research at PL Capital told Reuters.

Solar energy companies--Waaree Energies and Premier Energies--closed over 10% and 6% lower, respectively, to be the worst performers in the Nifty 200 and Nifty 500 indices.

Three reasons behind market decline:

1. Profit booking

Profit booking was seen in the markets after they rallied nearly 0.9% in morning trade on February 25.

"Amid ongoing global uncertainty and heightened volatility, traders are advised to maintain a disciplined and selective approach, focusing on fundamentally strong stocks during corrective phases. Fresh long positions should preferably be initiated only after a decisive and sustained breakout above 25,800 on the Nifty, which would indicate improved market sentiment and confirm the emergence of a stronger bullish structure," said Hitesh Tailor, Research Analyst, Choice Equity Broking Private Limited.

Bank Nifty fell 0.7% from day's high while Nifty IT fell 1% from intraday high of over 2%.

2. FII selling resumes

FII selling resumed on February 24 with institutional activity on February 24 showing Foreign Institutional Investors (FIIs) as net sellers, with equity outflows of Rs 102 crore, whereas Domestic Institutional Investors (DIIs) provided strong market support through net purchases of ₹3,161 crore.

3. Technical level

Nifty failing to rise above 25,670 could be a reason for sell on rise being seen in markets.

"We will look for consistent trades above 25.670 to confirm strength, aiming 25.900 initially. But, inability to float above 25530 could signal lack of upside momentum," said Anand James, Chief Market Strategist, Geojit Investments Limited.

"We are of the view that the intraday market texture is weak, but a fresh selloff is possible only after the market breaches the 200-day Simple Moving Average (SMA) or 25,300/82,000. If the market manages to trade above this level, it could bounce back to 25,500-25,650/82,500-82,800. Conversely, if it falls below 25,300/82,000, it could slip to 25,150-25,050/81,400-81,200. The current market texture is volatile; hence, level-based trading would be the ideal strategy for day traders," said Shrikant Chouhan, Head Equity Research, Kotak Securities.