Sensex drops 238 points, Nifty ends at 24,188: What pulled markets down today

Market ends in the red

Indian equity benchmarks closed lower on Tuesday, snapping a two-day winning streak. The BSE Sensex dropped 238 points, while the broader Nifty 50 ended the session at 24,188. Investors trimmed positions across sectors, with banking and financial stocks taking the biggest hit.

The sell-off was broad-based, but losses were contained by selective buying in IT and pharma stocks. Analysts said the market was due for a correction after recent gains.

What weighed on sentiment

Global cues turned weak overnight. US markets closed lower on Monday, and Asian peers traded mixed on Tuesday. Rising bond yields in the US and concerns over interest rate decisions by major central banks kept investors cautious.

Back home, profit booking emerged in frontline stocks that had rallied over the past month. The Nifty Bank index fell over 0.5%, dragging the benchmark lower. Heavyweights like HDFC Bank, ICICI Bank, and State Bank of India saw selling pressure.

Foreign portfolio investors were net sellers in the cash market on Monday, provisional data showed. That pattern continued into Tuesday, traders said.

Sectoral trends

Only three Nifty sectoral indices managed to close in the green. The Nifty IT index rose 0.3%, helped by gains in Infosys and TCS. Pharma stocks also edged higher, supported by hopes of steady US demand.

On the losing side, realty, auto, and metal stocks declined. The Nifty Realty index fell over 1% as investors booked profits after a sharp run-up. Auto stocks were hit by weak monthly sales data from some manufacturers.

Among individual stocks, Reliance Industries ended flat after a volatile session. The stock had gained in early trade but gave up gains as the broader market weakened.

Broader market holds up

The broader market showed relative resilience. The BSE Midcap index ended marginally lower, while the BSE Smallcap index eked out a small gain. That suggested the decline was driven more by large-cap profit booking than by any fundamental deterioration.

Market breadth was negative. On the BSE, about 1,700 stocks declined, while 1,400 advanced. Around 180 stocks hit their 52-week highs, indicating underlying strength in select pockets.

Volatility, as measured by the India VIX, rose 2% to 13.4. The fear gauge remains well below its recent peak, signalling that investors are not panicking.

What to watch

Traders will now focus on global central bank meetings and domestic macroeconomic data due later this week. The US Federal Reserve's policy decision and commentary on inflation will set the tone for emerging markets. Any sustained selling by foreign funds could extend the correction in the near term.