Stock market today: Why Sensex, Nifty are falling

Indian equity benchmarks fell on Monday, giving up their early gains after rebounding in the previous session, as elevated crude oil prices, high US bond yields and sustained foreign investor selling weighed on market sentiment.

The 30-share BSE Sensex pack declined 556.36 points or 0.77 per cent to 71,915.97, while the NSE Nifty index fell 150.60 points, or 0.67 per cent, to 22,370.15 at the last check.

Broader indices were largely stable, with Nifty Midcap 100 down 0.04 per cent and Nifty Smallcap 100 up 0.01 per cent.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said external headwinds were outweighing domestic positives, with elevated crude oil prices and high US bond yields continuing to affect the market.

"FIIs will continue to sell in the near term, and DIIs will continue to absorb the FII selling. This is the likely near-term market scenario," Vijayakumar said.

He added that sustained foreign investor selling and external headwinds have made Indian equities one of the worst-performing markets (year-to-date). However, the recent correction has made valuations fair and attractive in several segments.

Vijayakumar cited an estimated GDP growth rate of 7.1 per cent for FY27 and improving corporate profitability as factors supporting the market's fundamentals. He said investors with a medium-to-long-term investment horizon could consider accumulating fairly valued growth stocks, while remaining patient amid volatility.

He also said a sharp decline in crude oil prices following favourable developments in West Asia could trigger a significant market rally.

Which sectors could attract buying?

Market expert Neeraj Dewan, in an interaction with Business Today, said select banking stocks have corrected in recent weeks after performing well earlier. He sees value in the sector, noting that the Reserve Bank of India's (RBI's) interest rate hike could support banks' net interest margins (NIMs) in the initial stages.

Dewan also identified automobiles, real estate, metals, infrastructure and engineering stocks as sectors that could attract buying after their recent corrections.

Pharma stocks, which have outperformed, could remain relatively strong, although Dewan does not expect the sector to deliver a similar upside rally from current levels.

IT stocks: Is a sustained recovery likely?

Commenting on information technology stocks, Dewan said Tata Consultancy Services' (TCS') latest results were not as weak as the market had expected, prompting some short covering in the stock and other IT shares.

However, he cautioned against expecting a sustained rally in the sector at this stage, given the growth outlook for Indian IT companies.

Dewan said investors would closely track whether artificial intelligence (AI) contributes a larger share of revenue and earnings and whether international order inflows improve. He added that it was too early to conclude that these factors would support a sustained recovery.

Nifty outlook: 22,600 remains a key level

Pabitro Mukherjee, Deputy Vice-President (Research) at Bajaj Broking, said the rebound following the Nifty's eight-week losing streak was encouraging, but the modest gains were insufficient to confirm a sustained recovery.

He noted that a move above 22,600 could open the way for a further recovery towards 22,800 and 23,100. However, failure to cross 22,600 could keep the index in a corrective consolidation range of 22,200–22,600.

Deven Choksey, Managing Director of DRChoksey Finserv, said the recent market decline was driven largely by a lack of buying interest and higher selling pressure rather than panic or capitulation.

"If Nifty falls to 21,800 in a hurry, I would view it as the final leg of the correction," Choksey said.