Indian equity benchmarks saw sharp declines on Tuesday, May 27, erasing the gains of the previous two sessions, as investors opted for profit booking at elevated levels amid a confluence of domestic and global concerns. The Sensex dropped 820.16 points (1%) to 81,356.30 and the Nifty fell 239.15 points (0.96%) to 24,762.00 by 10 AM, with widespread selling across financials, IT, and consumer sectors. The selloff followed subdued global cues after U.S. President Donald Trump deferred proposed tariffs on EU imports and growing geopolitical tensions added to the risk-off mood.
Highlights:
Sensex fell 820 points, Nifty breached 24,800 mark in early trade.
Market pressure from weak global cues, monthly expiry, profit booking.
IT, financials, and cement stocks led the decline.
Profit Booking Near Record Levels Triggers Market Reversal
Market participants took profits off the table as the Nifty crossed the 25,000 mark on Monday, with many traders unwilling to chase prices amid lack of fresh triggers. According to Dharmesh Kant, Head of Equity Research at Cholamandalam Securities, investors are repeatedly selling at the 25,000 resistance level, indicating a strong technical cap in the absence of fundamental catalysts. The absence of bullish drivers in the near term has prompted short-term traders to cut positions aggressively, dragging both headline indices lower.
Highlights:
Strong resistance near 25,000 triggered heavy profit booking.
Analysts highlight lack of new catalysts to sustain recent highs.
Technical selling added to the momentum-driven correction.
Monthly Derivatives Expiry Heightens Volatility
The scheduled expiry of BSE’s monthly derivatives contracts, including Sensex and Bankex futures, added to the nervousness on Dalal Street. Though NSE’s expiry is set for Thursday, May 30, the simultaneous expiration of weekly and monthly contracts on BSE often results in intraday volatility and positioning adjustments by large traders. Historically, expiry sessions see significant intraday moves as traders square off leveraged positions, and Tuesday’s session appeared to follow this pattern.
Highlights:
Monthly and weekly expiry on BSE added to the volatility.
Traders unwound positions ahead of contract settlement.
Expiry-related adjustments contributed to heightened intraday swings.
Asian Market Weakness and Trump’s EU Tariff Delay Rattle Sentiment
Global sentiment remained fragile after President Trump delayed a proposed 50% tariff on EU imports. While the decision offered temporary relief, it also introduced fresh uncertainty about the timeline and nature of trade restrictions, prompting investors across Asia to reassess their risk exposure. Key indices like South Korea’s Kospi, Japan’s Nikkei 225, Shanghai Composite, and Hong Kong’s Hang Seng all traded in the red, exerting further pressure on Indian equities at the open.
Highlights:
Global markets dropped after Trump deferred EU tariffs.
Uncertainty on U.S. trade policy continues to impact risk sentiment.
Key Asian indices traded lower, dragging down Indian benchmarks.
Domestic Macroeconomic Data Releases Keep Traders Cautious
Traders also exercised caution ahead of important domestic macroeconomic announcements, including industrial production and manufacturing output data for April, scheduled for release on Wednesday. Later in the week, the Q1 FY26 GDP numbers will be published, adding to the cautious undertone. Market participants appeared reluctant to take fresh positions ahead of these releases, opting instead to trim exposure.
Highlights:
Industrial production and GDP data due this week.
Traders avoided aggressive bets ahead of key economic releases.
Economic uncertainty added to cautious market sentiment.
Volatility Index Surges as Investor Sentiment Deteriorates
The India VIX, a key barometer of market volatility and fear, surged nearly 6% to 19.05, its highest in several sessions. A rise in VIX reflects rising nervousness among traders and typically precedes bouts of market turbulence. The spike suggests heightened apprehension about near-term risks, both on the domestic and global fronts.
Highlights:
India VIX rose nearly 6% to 19.05, signalling increased fear.
Elevated volatility reflected growing unease among market participants.
Traders braced for potential further swings in the near term.
IT and Financial Shares Lead the Decline
Information technology and financial services were among the worst-performing sectors during the session. The Nifty IT index dropped nearly 1%, tracking weak global cues and concerns over export demand amid trade frictions. Banking and financial stocks, including Nifty Bank, Financial Services, PSU Bank, and Private Bank indices, also declined up to 1%, reflecting both profit-taking and weaker global growth expectations.
Highlights:
IT index down nearly 1%, reflecting global uncertainty.
Financial stocks slipped amid pressure from weak sentiment.
Sectoral drag exacerbated index-level losses.
Geopolitical and Health Risks Add to Risk-Off Mood
Heightened geopolitical tensions, especially after Germany authorised Ukraine to carry out strikes inside Russian territory, contributed to the market unease. Russia responded with intensified airstrikes for a third consecutive night, raising fears of escalation. Meanwhile, a sharp spike in India’s active Covid-19 cases, which jumped from 257 last week to 1,009, added another layer of concern for investors already worried about global headwinds.
Highlights:
Germany’s Ukraine stance intensified Russia’s military response.
Rising global tensions prompted risk aversion across asset classes.
Domestic Covid-19 spike further spooked market participants.
Drivers of the Decline:
Profit Booking: Investors booked profits at key resistance levels (Nifty 25,000), reflecting cautious sentiment amid lack of fresh positive triggers.
Derivatives Expiry: Monthly expiry on BSE led to heightened intraday volatility and positioning adjustments.
Weak Global Cues: Asian markets fell after US President Trump delayed a 50% tariff on EU imports, signaling prolonged trade risks.
Data Awaited: Investors stayed cautious ahead of key Indian macro data, including April industrial production and Q1 GDP.
Volatility Spike: India VIX surged nearly 6% to 19.05, indicating rising investor nervousness.
Sectoral Drag: IT and financials led the losses amid trade concerns and valuation pressures.
Geopolitical & Health Risks: Rising tensions over Ukraine-Russia and a spike in domestic COVID cases deepened risk aversion.
Impact on Stock Market & Investors:
Short-Term Sentiment Hit: Broad-based decline reflects weakened investor confidence, likely keeping indices rangebound near resistance levels.
Sectoral Rotation: IT and financials may remain under pressure; investors could rotate toward defensives like FMCG or pharma.
Caution Ahead of Data: Institutional investors likely to stay sidelined until macro trends offer clarity.
Volatility Risk: Rising VIX suggests higher short-term volatility; traders should brace for sharp moves.
Highlights:
Sensex down 820 pts; Nifty below 24,800
Profit booking, expiry volatility, weak global cues weighed
IT and financials dragged indices lower
Investors await domestic macro data and global trade clarity
India VIX up 6%, signalling elevated uncertainty
