The benchmark equity indices reversed early gains and traded lower on Tuesday, as investor sentiment took a hit following renewed tensions in the Middle East.
After surging 1,121.37 points or 1.36 percent to 83,018.16 in intra-day trade, the Sensex later trimmed most of its gains as reports surfaced of the ceasefire violations. But, the benchmark still managed to settle in the green, climbing 158.32 points or 0.19 percent to 82,055.11. On similar lines, the Nifty rose 72.45 points or 0.29 percent to end at 25,044.35. The index fell from an intra-day high of 25,317.70.
Oil & Natural Gas Corporation, Power Grid Corporation of India, Trent, IndusInd Bank and NTPC led the declines, falling up to 3 percent.
Key reasons behind the sharp market fall:
1) Ceasefire tensions in the Middle East: Israeli Defence Minister Israel Katz said he directed the military to carry out strikes on Tehran in response to what he claimed were missile attacks by Iran, breaching a ceasefire brokered just hours earlier by U.S. President Donald Trump.
Iran's ISNA news agency, however, dismissed these claims, saying no such missiles were fired. The conflicting reports triggered fresh uncertainty, raising doubts over the ceasefire's effectiveness and its ability to bring an end to 12 days of hostilities.
2) Profit-booking at higher levels: Markets saw strong gains earlier in the day with the Sensex rising over 1,100 points and the Nifty climbing 25,300. However, traders booked profits at higher levels, leading to a sharp pullback.
"The markets faced profit-taking after a firm first half, mainly in reaction to news of the ceasefire violation," said Ajit Mishra, SVP – Research, Religare Broking.
3) Monthly F&O expiry-led volatility: Volatility also increased ahead of the monthly expiry of futures and options contracts. On expiry days, traders tend to unwind positions or roll them over, often leading to unpredictable market movements.
"Firm call writing at the 25,200 strike ahead of expiry added to the pressure," Mishra added.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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