BY Our Business Correspondent
Indian equity benchmarks ended lower on Tuesday, breaking a four-session winning streak as investors turned cautious ahead of the Reserve Bank of India’s (RBI) monetary policy announcement scheduled for Wednesday. Profit booking in heavyweight stocks, coupled with uncertainty surrounding the central bank’s interest rate outlook, weighed on market sentiment, even as broader markets displayed resilience.
The benchmark indices also witnessed heightened volatility due to the weekly expiry of Nifty derivatives contracts and the implementation of the National Stock Exchange’s (NSE) new Closing Auction Session (CAS), prompting traders to trim leveraged positions before the policy outcome.
The BSE Sensex declined 210.08 points, or 0.27 per cent, to close at 78,428.95, while the Nifty 50 dropped 159.40 points, or 0.64 per cent, to settle at 24,614.90, slipping below the psychologically significant 24,650 mark. Despite Tuesday’s correction, the benchmarks remain firmly in positive territory after a robust rally over the previous four sessions during which the Sensex had gained 2.44 per cent and the Nifty advanced 3.29 per cent.
Market participants largely preferred to stay on the sidelines before the RBI’s policy decision, awaiting signals on inflation, economic growth, liquidity conditions and the future trajectory of interest rates. Analysts said the correction reflected prudent profit-taking rather than any fundamental deterioration in market sentiment.
RBI Policy in Sharp Focus
The three-day meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC) entered its second day on Tuesday, with Governor Sanjay Malhotra scheduled to announce the policy decision on Wednesday.
While expectations remain divided over the immediate policy action, investors are expected to closely scrutinise the RBI’s commentary on inflation trends, domestic demand, global uncertainties and liquidity management. Market experts believe that the central bank’s guidance will play a crucial role in shaping equity and bond market direction over the coming weeks.
The policy assumes greater significance against the backdrop of mixed global cues, firm crude oil prices and evolving geopolitical developments in West Asia, all of which have implications for inflation and external balances.
Heavyweights Drag the Market
Tuesday’s decline was largely driven by selling in index heavyweights, particularly in oil & gas, financial and FMCG counters.
Among the top losers on the Sensex were:
- Grasim Industries, which fell 3.74 per cent.
- Reliance Industries, down 2.13 per cent.
- HDFC Bank, which slipped 1.46 per cent.
Profit booking in these large-cap stocks exerted considerable pressure on benchmark indices, offsetting gains witnessed in select metal and media counters.
Sectorally, oil & gas and FMCG stocks remained under pressure, whereas metal and media shares attracted buying interest amid expectations of improving industrial activity and favourable commodity trends.
Broader Markets Show Strength
Unlike the benchmark indices, the broader market demonstrated remarkable resilience.
The BSE MidCap Index edged up 0.03 per cent, while the BSE SmallCap Index gained 0.27 per cent, indicating sustained investor appetite for quality mid-sized and emerging companies despite weakness in frontline stocks.
Market breadth, however, remained marginally negative. On the BSE, 2,108 stocks advanced, while 2,128 declined, and 203 shares remained unchanged, suggesting a balanced yet cautious trading environment.
Volatility Inches Higher
The India VIX, often referred to as the market’s fear gauge, rose 1.86 per cent to 12.15, reflecting increased expectations of short-term volatility ahead of the RBI policy announcement.
Market participants attributed the rise in volatility to multiple factors, including the monetary policy event, weekly derivatives expiry and adjustments related to the NSE’s new Closing Auction Session mechanism.
Technical analysts believe that although the broader trend remains constructive, the market may witness range-bound trading until fresh policy cues emerge.
According to chart analysts, the 24,750-24,780 zone now represents the immediate resistance for the Nifty. A decisive breakout above this range could revive bullish momentum. On the downside, immediate support is placed in the 24,460-24,430 zone, with sustained trading below these levels likely to invite further profit booking.
Commodity Markets Remain Firm
Global commodity prices continued to influence investor sentiment.
Brent crude oil for September settlement climbed 2.28 per cent to $85.68 per barrel, extending gains amid persistent geopolitical uncertainty in the Middle East and expectations of tighter global supplies.
Higher crude prices remain a key concern for India as they could increase import costs and put upward pressure on domestic inflation.
In the domestic bullion market, MCX Gold futures for October delivery rose 0.55 per cent to ₹1,43,724 per 10 grams, supported by safe-haven demand and expectations of prolonged global monetary tightening.
Bond and Currency Markets
India’s bond market remained relatively stable ahead of the RBI policy.
The yield on the benchmark 10-year government security eased marginally to 6.829 per cent from the previous close of 6.833 per cent, indicating cautious optimism among debt market participants.
The Indian rupee also strengthened modestly against the US dollar. The domestic currency traded around 95.33 per dollar, compared with the previous close of 95.37, supported by foreign fund inflows and improved risk sentiment.
Meanwhile, the US Dollar Index (DXY) remained largely steady near 99.85, while the US 10-year Treasury yield rose to 4.694 per cent, reflecting expectations of further monetary tightening by the US Federal Reserve.
Global Markets Positive Despite Geopolitical Risks
International markets presented a mixed yet largely positive picture.
Asian equities finished mostly higher after taking cues from Wall Street’s overnight rally, although investors continued to monitor geopolitical developments in West Asia and concerns surrounding the sustainability of the artificial intelligence-led technology rally.
European markets also traded higher following indications of renewed diplomatic engagement between Washington and Tehran, raising hopes of easing regional tensions despite continuing differences over the Gaza peace process.
US stock futures pointed to another firm session, with Dow Jones futures rising nearly 330 points during Asian trading hours.
Overnight, Wall Street witnessed strong gains after robust US manufacturing data reinforced confidence in the world’s largest economy.
The Dow Jones Industrial Average surged 693.38 points to a record closing high of 53,178.41, while the S&P 500 advanced 1.48 per cent to 7,600.50. The technology-heavy Nasdaq Composite climbed 2.13 per cent to 25,913.90.
Investors are now focusing on key US employment data later this week, particularly Friday’s non-farm payroll report, which could significantly influence the Federal Reserve’s next policy decision.
According to CME FedWatch estimates, financial markets continue to assign roughly a 65 per cent probability of another 25-basis-point rate increase at the US Federal Reserve’s September policy meeting.
Earnings Drive Stock-Specific Action
Corporate earnings continued to generate significant stock-specific movements across sectors.
Among the biggest movers was Life Insurance Corporation of India (LIC), whose shares plunged 8.68 per cent after the Government announced a major Offer for Sale (OFS) to reduce its holding in the insurance giant. The government offered a base issue of 2.5 per cent equity, with an option to increase the sale to 6.5 per cent in case of strong investor demand.
The OFS floor price of ₹382 per share represented a discount of nearly 11 per cent to the previous closing price, triggering selling pressure. Nevertheless, institutional investor response remained strong, with the non-retail portion receiving bids amounting to more than three times the base offer.
Electric scooter manufacturer Ather Energy emerged as one of the biggest gainers, soaring 14.25 per cent after reporting a sharp improvement in quarterly financial performance. The company significantly reduced its losses while posting an impressive 88.8 per cent year-on-year growth in revenue, highlighting continued momentum in India’s electric mobility sector.
Shipping major Great Eastern Shipping Company gained 2.47 per cent after delivering a stellar quarterly performance. Consolidated net profit jumped more than 159 per cent year-on-year, supported by strong freight rates and improved shipping operations.
Quick-service restaurant operator Restaurant Brands Asia locked in the 20 per cent upper circuit after narrowing its quarterly losses and reporting healthy revenue growth, reflecting improving consumer demand and operational efficiencies.
Agrochemical manufacturer Best Agrolife also witnessed strong buying interest, surging nearly 20 per cent after more than doubling its quarterly net profit.
Realty and Engineering Stocks Mixed
Real estate developer Kalpataru declined 5.72 per cent despite reducing its quarterly losses, as investors remained cautious over sector valuations.
Engineering firm Dee Development Engineers hit the 5 per cent lower circuit after reporting a sharp sequential decline in both profits and revenues.
Real estate company Hubtown slipped 1.84 per cent following a substantial fall in quarterly earnings.
Rail infrastructure player Texmaco Rail & Engineering lost 3.76 per cent. Although the company reported a strong increase in net profit, lower revenues disappointed investors.
State-owned consultancy firm RITES eased 1.55 per cent despite posting modest growth in both revenue and profit during the June quarter.
Outlook
Market experts believe that the near-term direction of Indian equities will largely depend on the RBI’s policy guidance and Governor Malhotra’s commentary regarding inflation and liquidity. In addition, investors will closely monitor global crude oil prices, US economic data, Federal Reserve expectations and geopolitical developments in West Asia.
While Tuesday’s correction interrupted the recent rally, analysts view it as a healthy consolidation rather than the beginning of a broader downturn. Strong domestic macroeconomic fundamentals, resilient corporate earnings and sustained participation from domestic institutional investors continue to provide support to the medium-term outlook. However, with global uncertainties persisting and key policy events unfolding both in India and abroad, volatility is expected to remain elevated in the near term.
Disclaimer: This report is intended for informational and journalistic purposes only and should not be construed as investment advice, a recommendation to buy or sell securities, or a forecast of future market performance. Investors should consult certified financial advisers before making investment decisions.