Sensex, Nifty fail to sustain recovery as intraday gains fade; what's next for D-Street?

Indian equity benchmarks extended their decline on Wednesday, failing to sustain intraday gains amid profit booking at higher levels and elevated crude oil prices. Gains in select banking and IT names, however, helped limit the downside.

The 30-share BSE Sensex pack fell 48.78 points or 0.07 per cent to settle at 72,480.29, while the NSE Nifty50 index declined 95.75 points or 0.42 per cent to close at 22,620.45.

The broader market remained largely unchanged, with both the midcap and smallcap indices slightly higher.

Ajit Mishra, SVP (Research) at Religare Broking, said, "Markets traded volatile on Wednesday but eventually edged lower, extending the prevailing corrective trend. After a largely flat opening, the benchmark indices initially attempted a recovery, with Sensex gaining over 500 points and Nifty moving above 22,800. However, the recovery failed to sustain, and selling resumed in the afternoon."

Mishra added, "Global macro concerns continued to keep sentiment fragile. Brent crude remained elevated around $103 a barrel despite moderating somewhat from recent highs, while the US 10-year Treasury yield remained near recent highs, having touched 5.293 per cent in the previous session. Persistent foreign selling remained another major overhang, while the rupee remained close to the Rs 96 per dollar mark.

With Nifty continuing to trade near six-month lows and broader market participation remaining weak, the near-term setup remains cautious, warranting a selective approach and close monitoring of the key support levels, Mishra further stated.
 
Vinod Nair, Head of Research at Geojit Investments, stated, "The relief rally loses its steam with profit booking at the higher levels, followed by a rebound in oil prices. The elevated global bond yields continue to remain a key overhang, limiting the scope for sustained risk-taking. Large-cap stocks, particularly in the banking and IT sectors, gained momentum as investors gravitated towards relatively attractive valuations and a higher margin of safety amid prevailing macro uncertainties. The overall market tone remains cautious."

Nair also said, "Investors continue to monitor the trajectory of crude oil prices, bond yields, inflation expectations, and the potential implications for global monetary policy. Consequently, market participants are likely to remain selective, favouring fundamentally strong businesses with resilient earnings profiles until there is greater clarity on the macroeconomic outlook."

Nifty outlook

Nandish Shah, Deputy Vice-President at HDFC Securities, said, "Short-term indicators are deeply oversold, with Nifty50 hovering near the critical 22,600 support zone that aligns with the 200-week moving average (WMA). While oversold conditions increase the likelihood of a technical bounce, it remains prudent to wait for the index to sustain above higher levels rather than fight the prevailing downtrend."

Level-wise, Shah said, "Immediate resistance lies at 22,810, and further in the 23,000–23,100 band. A decisive break above this zone is required to signal a meaningful recovery. Conversely, a sustained move below the recent swing low of 22,569 could extend the decline toward 22,200."