Sensex settles 550 pts lower from day's high, Nifty ends near 25,950: FII selling among key factors behind market decline

The Nifty IT index, which jumped as high as 2 percent earlier during the day, pared significant gains to remain only 0.41 percent higher by day's end. Bank Nifty, which was earlier in green, also slipped into the red by falling nearly 500 points from day's high.

"On the hourly chart, the Bank Nifty index has formed a lower top, closing below its 50 EMA with RSI in a bearish crossover, signaling weakening momentum. On the daily chart, the index closed near Friday’s low, indicating a likely retracement towards its 20-day EMA placed around 58300 levels. Hence, a cautious stance should be maintained at current levels. A cautious stance should be maintained until Bank Nifty reclaims 59300 levels on a closing basis," said Vatsal Bhuva, Technical Analyst at LKP Securities.

Broader market indices faced intense selling pressure than benchmark indices. Nifty Smallcap 100 index closed nearly 1% lower, while Nifty Midcap 100 index fell 0.32%.

Both benchmark indices are trading about 1.3% below their all‑time highs hit in September 2024. However, they have risen in six of the eight weeks since early October, driven by an improving earnings outlook, consumption revival due to GST rate cuts, record-low inflation, and steady domestic inflows.

"Given the swift, one-way rise in recent weeks, a mild corrective phase could not be entirely ruled out as the benchmarks took a breather, witnessing measured profit-taking," Dhupesh Dhameja, derivatives research analyst at SAMCO Securities, told Reuters.

3. Rupee near record low level

Indian rupee hit a record low level on Friday, before rebounding slightly. After hitting a record low of Rs 89.49 against the dollar on Friday, the Indian currency reportedly saw market intervention from the Reserve Bank of India (RBI) but still stood above the 89-mark.

The rupee ended at 89.23 against the US dollar on Monday, up 0.3 percent from its previous close. The currency has declined more than 4 percent so far in 2025.

RBI Governor Sanjay Malhotra on Thursday attributed the rupee's recent weakness to higher dollar demand, which he said could abate if India and the US agree to a trade deal. India's foreign reserves offer "ample protection" for the currency, he added.

The central bank likely sold dollars on the order-matching platform and in the non-deliverable forward market, helping lift sentiment, Reuters reported. On the back of that, the rupee opened at 89.15 apiece today. Bankers are now eyeing the key 90-mark for the Indian currency.

Despite the sharp recovery, the Indian currency is still below the psychological 90-level. Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities, said that with no visibility on tariff rollback or trade-related assurances, sentiment remained weak, leading to a broad risk-off move in the rupee. "Near-term weakness can extend further, with the rupee likely to trade in the 89.20–90.00 range," said Trivedi.

The currency's weakness since late 2024 has been largely attributed to the widening trade deficit and persistent FII outflows from domestic equities, said Emkay Wealth Management. It, however, added that the recent weeks have seen a return of positive FII inflows, offering hope for near-term stabilisation.

"With last week’s decisive break above 89, the pair now looks set to establish itself within a fresh 88.90–90.20 band as the market searches for stability," Amit Pabari, managing director at FX advisory firm CR Forex told Reuters.

4. Investors looking for a market breakout

Traders are looking for a decisive breakout on benchmark indices and till that happens markets will remain choppy, said analysts.

"On the weekly chart, the index has retested a cup-and-handle pattern and continued its upward movement, but this week it saw a correction from higher levels, indicating profit-booking and a temporary pause in the uptrend," said Choice Broking.

"On the downside, support lies at 26,000 and then at 25,900, with a deeper breakdown below 25,850 likely to trigger additional downside pressure. Given the current structure, a “buy-on-dips” approach remains favorable. However, traders should stay disciplined with strict stop-losses, especially considering the ongoing market volatility," it added.

SAMCO Securities, meanwhile, said the 25,900-mark remains a crucial make-or-break level. "Meaningful weakness would surface only if the index breaches 25,900. Until these pivotal boundaries are broken, the broader price action is likely to oscillate within a sideways zone," it said.

Axis Securities said that the trend-deciding level for the day is 26,100. “If Nifty trades above this level, it may further rally up to 26148-26227-26275 levels. However, if it trades below 26100 levels, we may witness  profit booking in the market, and the index may correct up to 26021-25973-25894 levels,” it said.

After a range-bound positive session, the market closed with a decline in the last half hour as Nifty50 could not hold above the key threshold of 26,000, said Vinod Nair, Head of Research, Geojit Investments Limited. "Investor sentiment remained cautious, in anticipation of key event risk like delays in finalizing the interim US-India trade agreement. Nonetheless, selective buying in IT stocks offered some support," he added.

The analyst noted that on a brighter note, global markets remain optimistic, fueled by renewed expectations of a December Fed rate cut, prompted by downside risks to U.S. employment data. "Domestically, favorable macro indicators, including GDP growth, controlled inflation, stable oil prices, and a strong H2 earnings outlook, have contributed to market stability," he added.

Top losers and gainers

Bharat Electronics (BEL) shares were the top loser on the Nifty 50 index as sentiment around defence stocks turned bearish after a Tejas fighter jet crashed during an air show in Dubai last Friday. JSW Steel and Max Healthcare Institute were also among the top losers, falling more than 3 percent and 2 percent respectively.

Bucking the trend, Tech Mahindra shares closed over 2 percent higher to emerge as the top gainer on the Nifty 50 index. Eicher Motors, Bajaj Auto and Wipro shares followed, rising 1-2 percent each.

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(With inputs from Reuters)

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