5 reasons why Sensex and Nifty are trading with deep cuts

Benchmark indices Sensex and Nifty fell over 1% on Tuesday, following their biggest single-day gain in over four years on Monday, which came after reports of a fragile ceasefire with Pakistan.

The BSE Sensex dropped 1,000 points, or 1.21%, to 81,430, while the Nifty50 declined 264 points, or 1.06%, to 24,660 around 10:34 am.

The total market capitalisation of all BSE-listed companies fell by Rs 63,488 crore to Rs 432.16 lakh crore.

Why is the stock market down today?


1) Profit booking after a strong rally


Sensex and Nifty surged nearly 4% on Monday, mainly in response to the ceasefire news. On Tuesday, investors seemed to be booking profits after the rally, triggering a market pullback. The rapid rise in valuations over a short span also made traders cautious, leading to selling in heavyweight stocks.

"It is important to understand that yesterday's sharp 916-point surge in Nifty was not caused by institutional activity. The combined FII and DII buying yesterday was only Rs 2694 crores. This means the market surge was triggered by short-covering and HNI plus retail buying. This implies that institutional activity is likely to remain subdued in the coming days, which may constrain the continuation of the rally," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

2) Easing US-China trade tensions


Global investor sentiment turned positive after the US and China agreed to reduce tariffs and cooperate economically. However, this may not immediately benefit Indian markets. Some analysts had earlier anticipated that prolonged US-China tensions would push global manufacturers to diversify supply chains and consider India as an alternative. With tensions easing, that narrative has weakened.

3) Rise in crude oil prices


Crude oil prices surged to a two-week high on Monday, supported by improving global trade sentiment. Brent crude rose to $64.74 per barrel, and WTI climbed to $61.77—both up more than 5.5% over the past fortnight. On Monday alone, both benchmarks gained around 1.5%, their highest closing since April 28. However, on Tuesday, prices slipped by about 0.3%.

4) Rising U.S. Treasury yields


The US 10-year Treasury yield rose to 4.457%, up from 4.25% in late March. Higher bond yields make US assets more attractive to global investors, often prompting a capital shift away from emerging markets like India. This trend has put additional pressure on Indian equities.

5) Decline in index heavyweights


Heavyweight stocks in banking, finance, and IT dragged the market lower. HDFC Bank, Infosys, ICICI Bank, Kotak Mahindra Bank, TCS, and Reliance Industries together contributed to a 502-point drop in the Sensex.

IT stocks witnessed profit booking after Monday’s sharp gains. Infosys had surged nearly 8% while TCS rose over 5% in the previous session, but both saw declines on Tuesday.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)