Sensex closes 400 points off highs, Nifty below 24,100: What pulled markets down

Indian equity benchmarks ended a volatile session nearly flat on Thursday, giving up early gains as geopolitical concerns and fluctuating oil prices dampened sentiment. The Sensex slipped about 400 points from its day's high, while the Nifty closed below the crucial 24,100 mark.

The markets had opened on a strong note. The Sensex climbed over 260 points in early trade, and the Nifty crossed 24,130. A rally in information technology stocks powered the initial move after soft US inflation data raised hopes of a less aggressive rate stance from the Federal Reserve.

However, the momentum faded sharply as the session progressed. Profit-booking emerged at higher levels, and fresh worries about global stability pulled benchmarks into the red.

Geopolitical tensions and oil prices weigh

Traders pointed to rising geopolitical uncertainties as a key reason for the reversal. Reports of escalating tensions in West Asia and renewed friction between major economies kept investors on edge.

Crude oil prices swung during the day, adding to the unease. A spike in oil prices threatens to widen India's trade deficit and stoke inflation, which could force the Reserve Bank of India to hold interest rates higher for longer.

These headwinds offset the positive start. Analysts said the market's inability to hold gains despite a strong opening reflects underlying fragility.

IT stocks rally on US inflation data

The IT sector was the standout performer in early trade. Companies with large exposure to the US market jumped after the latest US consumer price index data came in softer than expected.

Soft inflation reduces the pressure on the Federal Reserve to hike rates. That is good news for Indian IT firms, which earn a significant portion of their revenue from the US. The rally, however, did not sustain across the board as broader indices came under selling pressure.

Investors booked profits in banking and auto stocks, which had run up in recent sessions. The Nifty Bank index ended lower, dragging the headline index down.

What happens next

Market participants are now watching for further cues from global central banks and oil price movements. The next round of domestic macroeconomic data is also due in the coming days.

Analysts expect choppy trade ahead. The Nifty has support near 24,000, while resistance sits around 24,300. A decisive break on either side could set the direction for the next few weeks.

Traders are advised to keep a close watch on geopolitical news and commodity prices. Until clarity emerges, volatility is likely to remain the norm.