Sensex falls 500 pts from day's high, Nifty below 25,650: Four reasons behind market trimming gains

Sensex falls 300 pts from day's high, Nifty below 25,700: Four reasons behind market trimming gains

• Sensex and Nifty trimmed gains amid profit booking.
• US tariff uncertainty and weak global cues hit market sentiment.
• Nifty below 25,700; Sensex drops 300+ points.

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Benchmark indices Sensex and Nifty fell significantly from day's high on February 23 amid profit booking.

At 2:13 pm, the Sensex was up 210.7 points or 0.25% at 83,025.41, and the Nifty was up 57.1 points or 0.22% at 25,628.35. About 1,731 shares advanced, 2,172 shares declined, and 156 shares were unchanged. Sensex fell 500 points from day's high while Nifty was trading below the 25,650-mark. The intraday high of Sensex was 83,486.15 and that of Nifty 50 was 25,771.45.

Key factors behind market trimming gains:

1) Profit booking

The markets saw profit booking at higher levels after the optimism was seen fading as US President Donald Trump imposed 15% tariffs after the US Supreme Court Friday struck down the tariffs imposed by Trump on most of the country's trade partners. Markets are on course for gains for second consecutive session.

"The Trump tariff tale has become murkier after the US Supreme Court declared the tariffs illegal. The SC judgement is, indeed, a landmark decision which will seriously impact Trump’s tariff weaponisation strategy. Even the new 15 % global tariff imposed under section 122 will be challenged in courts and the probability of this decision getting annulled is high since section 122 allows the US president to impose tariffs to tackle serious Bslance of Payments crisis, and the US doesn’t have a Balance of Payments crisis now.

"India has already delayed the visit of its trade negotiating team to the US in the light of the changed scenario. This is welcome move. From the market perspective the US SC decision is indeed a positive, but this is not sufficient to trigger a sustained rally in the market. The market will see only a relief rally which is unlikely to sustain. The market will respond only to the fundamentals, which are fortunately improving," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

2) Weak global cues

Wall Street futures and the dollar slid in Asia on Monday as confusion over US tariffs revived the "sell America" trade, while confidence in the entire AI sector was set to be tested by results from tech-diva Nvidia this week.

Gold gained and oil prices eased ahead of another round of talks between the United States and Iran due in Geneva on Thursday, with the risk of US military strikes lingering if a deal is not done.

Uncertainty loomed large after the US Supreme Court struck down President Donald Trump's emergency tariffs, leading him to announce a new 10% rate on the rest of the world, only to then lift it to 15% in a move that even seemed to surprise some of his own officials.

"The tariff landscape is now more uncertain than before, uncertainty is not good news for any economy or market," Rodrigo Catril, a senior FX strategist at NAB told Reuters.

"Unless common sense prevails, we could be entering a circular process where new tariffs are announced, then potentially overturned, only for new tariffs to be announced, and we do the dance again."

For Europe, EUROSTOXX 50 futures and DAX futures both eased 0.5%, while FTSE futures fell 0.2%.

S&P 500 futures fell 0.8% and Nasdaq futures dropped 1.0% ahead of earnings from Nvidia, which are sure to cause waves given the tech behemoth makes up almost 8% of the S&P 500 index.

3) Technical level

An analyst said Nifty has to decisively cross 25,700 for further gains to be seen in the market.

"The recent wild swings have helped form a flag pattern that projects a vertical rise shortly. However, should we stumble again in the 26200 vicinity, the upside hopes will have to be abandoned. We will go in today on a positive note, but expect upsides to strengthen only once past 25,840. Alternatively, inability to float above 25,700 could signal loss in upside momentum, but we will wait for a slippage past 25,590 to switch sides," said Anand James, Chief Market Strategist, Geojit Investments Limited.

4) IT sell-off continues

IT shares continued to fall for fourth straight day and the sectoral index was trading 1.5% lower in late morning trade.

IT stocks fell after the global brokerage Jefferies downgraded them saying that there are risks as the industry requires a change in operating model. Artificial intelligence may structurally change the IT business mix towards consulting and implementation while shrinking managed services.

Among information technology stocks, Wipro fell nearly 3% and was worst hit in the index. Infosys, Tech Mahindra, and HCL Technologies fell 1-2%.