Nifty slips below 25,650 and Sensex drops above 350 points as profit booking hits markets after the India US trade rally
New Delhi: Indian stock markets opened lower on Wednesday as investors turned cautious after the previous session’s massive rally. At the same time, attention shifted to the Reserve Bank of India’s Monetary Policy Committee meeting, which added to market nervousness.
During early trade, selling pressure dominated the markets as traders booked profits following Tuesday’s sharp gains triggered by the India US trade deal.
Markets Open Lower
In the pre open session, the BSE Sensex slipped nearly 500 points and tested the 83,250 level. Meanwhile, the NSE Nifty breached the 26,700 mark around 9:10 AM.
Soon after the opening bell, the Sensex started trading just below 83,400, falling more than 350 points. At the same time, the Nifty50 dropped over 130 points and traded slightly below 25,640 around 9:15 AM.
This early fall showed that investors preferred to stay cautious after the strong rally seen a day earlier.
Profit Booking Begins
The weakness in the market came after Dalal Street witnessed one of its strongest single day performances in recent months. On Tuesday, Indian markets surged after the United States reduced tariffs on Indian goods to 18 percent from 50 percent under the India US trade deal.
As a result, investors became optimistic about export growth, foreign capital inflows, and currency stability. The Sensex jumped 4,205.27 points during the day and touched an intra day high of 85,871.73. Later, it closed at 83,739.13, gaining 2,072.67 points or 2.54 percent.
Similarly, the Nifty also recorded strong gains during the session. The rally added massive wealth, as the total market capitalisation of BSE listed companies rose by Rs 12,10,877.45 crore to Rs 4,67,14,754.77 crore.
However, after such a sharp rise, investors began locking in profits, leading to selling pressure on Wednesday morning.
IT Stocks Drag Market
Meanwhile, heavy selling in IT stocks played a major role in dragging the indices lower. Weak global cues and a selloff in US technology stocks spilled over into Indian markets.
As a result, the IT index plunged 5.76 percent, becoming the worst performing sector. Large IT stocks such as Infosys, TCS, HCL Tech, and Tech Mahindra led the losses and pulled down overall market sentiment.
Mixed Sector Trend
Despite the broader weakness, some stocks managed to gain. Among Sensex stocks, Mahindra and Mahindra, Tata Steel, ITC, PowerGrid, and NTPC traded higher in early trade.
In the broader market, performance remained mixed. The Nifty Midcap Select index fell 0.40 percent, showing caution in mid sized stocks. On the other hand, the Smallcap50 index rose 0.39 percent, indicating selective buying at lower levels.
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Sector wise, metal stocks outperformed the market, with the Metal index gaining 1.49 percent.
RBI MPC In Focus
Now, investor focus has shifted to the RBI Monetary Policy Committee meeting, which begins today. RBI Governor Sanjay Malhotra will announce the policy decision on February 6.
Most market participants expect the central bank to keep interest rates unchanged and maintain a dovish stance. Experts believe that the economy does not need immediate monetary support at this stage, and the RBI may wait to see how earlier policy measures impact growth.
Expert Opinion
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said that the rally driven by the India US trade deal may not sustain for long. He explained that the selloff in US IT stocks will likely affect Indian IT shares as well.
He added that valuations remain high, and therefore, there is limited support for a continued rally. According to him, Tuesday’s rally was largely driven by foreign investors covering short positions and buying shares worth Rs 5,236 crore in the cash market.
Given the current valuations, he believes the bullish momentum may slow down.
Outlook Ahead
Vijayakumar advised investors to focus on fairly valued large cap stocks. He also said that export oriented sectors such as textiles, apparel, gems and jewellery, and marine processing could continue to see buying interest.
Additionally, January auto sales numbers suggest that demand remains strong, offering some support to the broader market outlook.
For now, markets are expected to remain volatile as investors wait for clarity from the RBI policy decision and assess whether the trade deal optimism leads to sustained foreign inflows or short term consolidation.
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