Sensex tumbles 778 points; Nifty briefly slips below 22,900 amid CAS volatility; what's ahead?

Indian equity benchmarks extended their decline on Tuesday, reversing early gains to settle sharply lower as elevated crude oil prices and rising global bond yields weighed on investor sentiment.

The 30-share BSE Sensex pack slumped 777.94 points or 1.04 per cent to close at 74,003.82, while the NSE Nifty50 index declined 279.50 points or 1.19 per cent to end at 23,118.60.

The Closing Auction Session (CAS) remained in focus during fag-end trade. Nifty briefly slipped BELow the 22,900 mark during the indicative closing process on expiry day, hitting a low of 22,879, before settling at 23,118.60.

Among the major Nifty laggards, shares of Bharat Electronics Ltd (BEL), Shriram Finance Ltd, Adani Enterprises Ltd, InterGlobe Aviation Ltd (IndiGo's parent) and Grasim Industries Ltd plunged by up to 5.30 per cent.

The broader market underperformed the benchmark indices. Nifty Midcap100 dived 2.12 per cent, while Nifty Smallcap cracked 2.43 per cent.

Why did market fall?

Vinod Nair, Head of Research at Geojit Investments, said, "Domestic markets remained under pressure, extending their recent correction as elevated crude oil prices and rising global bond yields weighed on sentiment. Investors stayed cautious ahead of key central bank meetings this week, with growing expectations of further policy tightening by major economies. Concerns about a prolonged high-interest-rate environment, particularly in the US, kept Treasury yields near multi-year highs and continued to dampen emerging market sentiment amid persistent foreign outflows. Mid- and small-cap stocks lagged benchmark indices, while most sectors closed sharply lower."

However, Nair added, "IT stocks outperformed as comments suggesting slower AI development eased concerns over the rapid disruption of traditional IT services. In the near term, sustained high oil prices and elevated bond yields may continue to pressure risk appetite, though strong domestic fundamentals and value buying by local investors could help contain downside risks."

Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, stated, "Indian equities suffered a sharp reversal, surrendering their opening gains as Brent crude hovered near $107.40 a barrel, US bond yields remained elevated and investors adopted a cautious stance ahead of the Federal Reserve's policy decision. The selling was broad-based, with information technology emerging as the only sector to finish in positive territory. Selective buying in large technology exporters suggested that immediate concerns over AI-led disruption had eased, although the gains were insufficient to offset weakness across the rest of the market. All other sectoral indices ended lower, underscoring the breadth of the decline."

He added, "Market anxiety intensified, with India VIX rising around 8 per cent to 13.27 as investors sought greater downside protection. The broader risk-off mood reflected concerns over elevated crude prices, potential disruptions to Middle East oil supplies and the prospect of tighter US monetary policy."

Nifty, Nifty Bank outlook

On the near-term outlook, Radhakrishnan said, "The near-term trend for Nifty remains firmly under pressure. Any rebound is likely to attract selling unless the Nifty reclaims 23,300 and Nifty Bank moves back above 56,000."