Sensex settles 250 pts lower, Nifty ends below 25,750: 8 key factors behind market decline

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

• Sensex and Nifty fell after early gains due to profit booking and FII selling.
• Auto, IT, and pharma stocks fell; Larsen & Toubro, Dr. Reddy's lagged.
• Rupee weakened, crude prices rose, and weak global cues added to market pressure.

Did our AI summary help?

The benchmark equity indices Sensex and Nifty retreated from early highs and settled lower on Tuesday after a brief pause on January 12, as investors booked profits across key sectors amid persistent foreign fund outflows and selling in blue-chip stocks.

In a volatile trade, the Sensex dropped 250.48 points, or 0.3 percent to settle at 83,627.69. During the day, it declined 615.38 points, or 0.73 percent to 83,262.79. The Nifty edged lower by 57.95 points or 0.22 percent to 25,732.30.

Markets had opened on a firm note after both indices ended about 0.4 percent higher on Monday, snapping a five-session losing streak that had pulled benchmarks down by nearly 2.5 percent. The recovery was supported by hopes of renewed momentum in India-US trade talks after US envoy said the two sides would discuss trade issues.

However, the early gains were short-lived as selling pressure emerged in auto, IT and pharma stocks.

Larsen & Toubro, Dr. Reddy's Laboratories and Cipla were among the key laggards in the Nifty50 pack, declining up to 2 percent, while ETERNAL and Oil & Natural Gas Corporation gained up to 3 percent.

Key factors behind market decline

1) Profit booking: Investors booked profits after the indices rose nearly 0.5 percent in early trade. On Monday, both Sensex and Nifty had recovered nearly 1.2 percent from their intraday lows following comments by US envoy Sergio Gor, which led to the unwinding of some bearish positions.

2) Persistent FII selling: Foreign institutional investors (FIIs) remained net sellers, offloading shares worth Rs 3,638.40 crore on Monday. This marked the sixth straight session of net selling after a brief pause on January 2, adding pressure on domestic equities due to sustained capital outflows.

Stock Market LIVE Updates

3) Rupee decline: The rupee weakened by 5 paise to 90.22 against the US dollar in early trade amid a stronger greenback, higher crude oil prices and continuous foreign fund outflows. A weaker rupee tends to weigh on market sentiment, especially for import-dependent sectors.

4) Trump announces new tariffs: US President Donald Trump announced that any country "doing business" with Iran would face a 25 percent tariff on its trade with Washington. The move could affect major trading partners of Iran such as India, China and the UAE, raising concerns over trade flows.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said "Geopolitical developments and President Trump’s comments and actions will continue to influence markets. Trump’s weaponisation of tariffs have already impacted global trade and particularly countries which have been targeted with penal tariffs. Trump’s latest declaration that the US will impose 25% tariffs on countries doing trade with Iran clearly sends out the message that this policy of weaponisation of tariffs will continue."

5) Nifty expiry: Tuesday is also the weeklyh expiry day for Nifty derivatives contracts, which typically leads to higher volatility as traders roll over or square off positions.

6) Muted IT results: IT stocks came under pressure after Tata Consultancy Services reported a 13.91 percent drop in December quarter profit to Rs 10,657 crore, mainly due to a one-time impact of new labour codes. HCL Technologies posted an 11.2 percent decline in consolidated net profit to Rs 4,076 crore.

Shares of HCL Technologies fell over 2 percent as brokerages remained cautious. HSBC and CLSA reiterated 'Hold' ratings, with CLSA flagging the risk of sequentially negative growth in the March quarter due to seasonal weakness. TCS also declined on subdued demand outlook, despite stable margins.

7) Higher crude prices: Brent crude rose 0.3 percent to USD 64.06 per barrel. Rising oil prices tend to pressure India’s trade balance and inflation outlook, affecting market sentiment.

8) Weak global cues: In Asia market, Shanghai’s SSE Composite was trading marginally lower. US futures were down up to 0.3 percent, indicating a weak start for Wall Street.

Technical view

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, said "After witnessing an excellent upside recovery from the lows on Monday, Nifty slipped into weakness from the highs on Tuesday and closed the day's lower amidst recovery note. After opening on an upside gap, Nifty failed to sustain the highs and slipped into weakness in the early-mid part of the session. Smart recovery has emerged from near the lows of 25600 and Nifty finally closed off the lows. The opening upside gap has been filled completely."

"A long bear candle was formed on the daily chart with long lower shadow. Technically, this market action indicates presence of crucial overhead resistance around 25900-26000 levels. But the buying has started to emerge from near the lower supports. This is positive signal and hints at the possibility of eventual breakout in the short term. The underlying short-term trend of Nifty remains positive. The formation of higher bottom reversal pattern on intraday chart (60 min) indicates that the market could move up from here and surpass the hurdle of 25900-26000 levels in the next few sessions. Immediate support is placed at 25600 levels," he added.

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.