Sensex, Nifty extend fall but recover from intraday lows on expiry day; outlook still cautious?

Indian equity benchmarks extended their decline on Tuesday, but staged a recovery from intraday lows on the monthly expiry day, as investors continued to track elevated global bond yields, a weaker rupee and persistent foreign fund outflows.

The 30-share BSE Sensex pack fell 242.65 points or 0.33 per cent to settle at 72,529.07, while the NSE Nifty50 index declined 64.05 points or 0.28 per cent to close at 22,716.20. During the day, Sensex touched a low of 72,064, while Nifty hit 22,569.65, slipping below its 200-week moving average (200-WMA) of 22,607, before recovering from the lows.

Sectorally, selling remained broad-based, with realty, IT and auto stocks among the key laggards. Metal and pharma stocks, however, ended higher.

The broader market remained under pressure, with both the midcap and smallcap indices declining around 1 per cent each.

What analysts say

Ajit Mishra, SVP – research, Religare Broking, said, "Markets remained under selling pressure on the monthly expiry day, extending the ongoing corrective trend. After a weak opening, the benchmark indices remained under pressure through most of the session and traded near their lowest levels in nearly six months, before recovering marginally from the lows."

He added, "Global concerns continued to weigh on sentiment, with crude prices remaining elevated, the US 10-year Treasury yield staying firm and the rupee witnessing fresh weakness amid continued foreign fund outflows. However, oversold conditions and expiry-related activity triggered some recovery from the day's lows, limiting the overall decline."

Mishra further stated, "While most sectors remain under significant pressure, pharma is showing noticeable resilience, whereas IT and FMCG could witness further weakness. Amid the prevailing conditions, we maintain a cautious view on the market and recommend keeping a close watch on key index levels for further directional cues."

Vinod Nair, Head of Research at Geojit Investments, noted, "Domestic equities continue to face correction-led headwinds amid volatile crude prices, US Treasury yields hovering near two-decade highs, and persistent FII outflows exerting pressure on the rupee. Adding to the pressure, the unprecedented pace of IPO fundraising is absorbing incremental liquidity. Investor risk appetite remains subdued against a hawkish global backdrop amid rising odds of additional rate hikes later in the year.

Nair also said, "While geopolitical tensions will continue to shape near-term sentiment, market focus is gradually shifting towards Q2 earnings, with expectations already tempered versus Q1. A meaningful de-escalation of the US-Iran conflict could trigger a sharp relief rally driven by improved risk sentiment. Until then, investors are likely to remain selective, favouring fundamentals and earnings visibility over broad-based market exposure."

Nifty outlook

Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, said, "Going forward, the 22,570–22,550 zone could act as immediate support for Nifty. A decisive move below this zone could trigger fresh selling pressure towards 22,400. On the upside, the 22,900–22,930 zone could act as an immediate hurdle. A sustained move above this zone could extend the pullback towards 23,050. However, the broader structure remains weak until the index witnesses sustained buying traction."