Sensex, Nifty reverse early gains amid profit booking and global jitters

India’s benchmark indices, the Sensex and the Nifty, gave up early gains on Tuesday, slipping into negative territory by midday as investors booked profits following a strong rally in the previous session.

After rising more than 1 per cent on Monday, both indices opened higher and extended gains in early trade, with the Sensex climbing over 500 points and the Nifty reclaiming the 23,500 mark. However, the momentum proved short-lived, with both benchmarks turning lower by late morning.

Here are the key factors behind the reversal:

Profit booking at higher levels
Investors chose to lock in gains after Monday’s sharp rebound, particularly in IT, FMCG and financial stocks. The IT sector led the decline, with selling pressure building ahead of the US Federal Reserve’s policy meeting.

Continued foreign investor selling
Foreign Institutional Investors (FIIs) remained persistent sellers, offloading equities worth more than Rs 9,300 crore in the previous session. March has seen sustained outflows, with foreign investors pulling out over Rs 66,000 crore so far, dampening overall sentiment.

Weakness in the rupee
The Indian rupee slipped against the US dollar, weighed down by rising crude oil prices and ongoing capital outflows. A softer currency often reflects investor caution and adds pressure on equity markets.

Expiry-related volatility
Tuesday marked the weekly expiry of Nifty derivatives contracts, a factor that typically leads to heightened volatility as traders adjust or close positions.

Geopolitical tensions
Ongoing conflict in West Asia, involving the United States, Israel and Iran, has added to global uncertainty. Such geopolitical risks tend to reduce risk appetite among investors and trigger cautious trading behaviour.

Rising crude oil prices
Brent crude hovered around $103 per barrel amid concerns over supply disruptions linked to tensions in the Strait of Hormuz. Higher oil prices are particularly negative for India, which relies heavily on imports, as they can fuel inflation and widen the trade deficit.

Fed policy uncertainty
Investors are closely watching the US Federal Reserve’s policy meeting, with expectations that interest rates may remain unchanged. However, any signals on future policy direction or inflation outlook could influence global markets.

Market experts noted that Monday’s rally on Dalal Street was largely driven by short-covering after recent declines, rather than strong underlying fundamentals. As a result, Tuesday’s pullback reflects lingering uncertainty rather than a clear shift in trend.

Technically, analysts expect the Nifty to remain range-bound in the near term, with intermittent dips and limited upside momentum unless fresh triggers emerge.

Despite the decline in benchmark indices, broader markets showed some resilience, with mid-cap and small-cap stocks trading slightly higher, indicating selective buying interest.

With PTI and IANS inputs