The BSE Sensex dropped 1,281 points, or 1.55%, to end at 81,148, while the NSE Nifty declined 346 points, or 1.39%, to settle at 24,578.
The total market capitalisation of all BSE-listed companies fell by Rs 1.3 lakh crore to Rs 431.27 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.
“The domestic market witnessed profit booking today, following yesterday’s sharp rally. The relief-driven surge—fuelled by easing global and domestic risks, including a reduction in trade war tensions and Indo-Pak geopolitical stress—appears to be taking a breather,” said Vinod Nair, Head of Research, 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.
Global brokerage firm CLSA highlighted that India had become a “hiding place” for investors amid global trade tensions, noting that India was the second-best performing market since March. However, with the US-China deal reducing trade war fears, CLSA cautioned that India’s relative attractiveness could diminish if capital starts flowing back into Chinese equities.
3) Rise in crude oil prices
Crude oil prices edged higher on Tuesday, with Brent crude rising 0.3% to $65.18 per barrel and U.S. WTI up 0.5% to $62.25. Over the past two weeks, Brent crude has surged nearly 6%, reaching its highest levels since April 28. Rising oil prices can heighten inflationary pressures, which may negatively affect Indian equities.
4) Rising U.S. Treasury yields
The US 10-year Treasury yield rose to 4.447%, 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
Banking and IT stocks weighed heavily on the market. HDFC Bank, Infosys, Reliance Industries, Bharti Airtel, ICICI Bank, and TCS together contributed to an 845-point drop in the Sensex.
IT stocks saw profit booking after Monday’s sharp gains. Infosys surged nearly 8% and TCS rose over 5% in the previous session, but both declined by 3.5% and 3%, respectively, 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)
