Closing Bell: Market snaps after gaining for two sessions; Sensex, Nifty slide 0.7% amid profit booking, FII selling

Indian equity benchmarks, the BSE Sensex and the NSE Nifty, closed lower on Tuesday, after gaining in the last two sessions, as investors booked profit amid valuation concerns. The weak cues from across Asian markets, fresh selling by foreign institutional investors (FIIs), and muted earnings from blue-chip companies further dented sentiments. 

Paring some early losses, the Sensex settled at 81,552, down by 625 points, or 0.76%. Similarly, the NSE Nifty50 ended lower by 176 points, or 0.7%, at 24,826. During the session, the Sensex declined as much as 984 points, or 1.2%, to 81,192, and the Nifty50 dropped 270 points, or 1.08%, to 24,731. 

However, broader markets outperformed the benchmark indices and showed strong resilience, aided by better-than-estimated fourth quarter earnings and moderation in premium valuation. The Nifty Midcap 100 and Nifty Smallcap 100 ended higher by 0.15% and 0.10%, respectively. 

“The benchmark index once again failed to decisively breach the 25k resistance level, reflecting the absence of positive triggers. Large-cap stocks underperformed, weighed down by subdued FII participation and lacklustre earnings from blue-chip companies. Conversely, mid- and small-cap segments remained relatively resilient, supported by better-than-estimated fourth quarter earnings and moderation in premium valuation,” said Vinod Nair, Head of Research, Geojit Investments. 

Top gainers and losers 

Among the Sensex constituents, 25 out of 30 stocks settled in negative terrain amid profit booking at higher levels. The top five losers on the Sensex pack were Ultratech Cement , ITC , Tata Motors , Axis Bank , and NTPC , sliding in the range of 1.4-2.2%. 

On the other hand, IndusInd Bank , Sun Pharma , Adani Ports , Nestle India , and Asian Paints were among the top five gainers, rising by 2.6%. 

On the sectoral front, a mixed trend was observed, with bank, especially PSUs, along with realty and pharma, ended with marginal gains, while FMCG, IT, and auto sectors witnessed profit-booking. 

"Markets traded with high volatility and lost over half a per cent after two consecutive sessions of rebound. The Nifty index experienced sharp swings in both directions during the first half; however, sustained profit-taking in heavyweight stocks across sectors eventually dragged the index lower,” said Ajit Mishra, SVP, Research, Religare Broking. 

“We are currently witnessing a tug-of-war between bulls and bears amid mixed global cues. However, favourable domestic factors such as a good monsoon and strong macroeconomic data are helping maintain a positive undertone,” he added. 

Analysts maintain a positive outlook on the market 

Ajit Mishra of Religare Broking continues to maintain a positive outlook on the market, recommending traders to adopt a "buy on dips" strategy with a strong emphasis on stock selection. “However, sustained strength in the banking and financial sectors is crucial for the Nifty to overcome the 25,200 hurdle and regain upward momentum,” he said. 

Shrikant Chouhan, Head Equity Research, Kotak Securities, said the market bounced back sharply, but once again, profit booking occurred at higher levels. Currently, the market is witnessing non-directional activity; perhaps traders are waiting for an either-side breakout.

For Nifty and Sensex, 24,700 and 81,100 would be the key support zones for traders, while 25,000 and 82,200 would act as a crucial resistance zone for the bulls. “As long as the market trades within this range, a range-bound texture is likely to persist. On the higher side, a successful breach of 25,000/8220 could push the market up to 25,100–25,250/82500-83000. On the downside, a fall below 24,700/81100 could retest levels of 24,500–24,450/80600-80500.” 

Technically, Nifty has been finding it difficult to cross 25,116 resistance and continuing its choppy trend, said Nandish Shah, Senior Derivative & Technical Research Analyst, HDFC Securities. On the downside, 24,700 and 24,462 could offer support in the Nifty. A decisive level above 25,116 would bring back the bullish momentum in the Nifty.