Sharp Selloff Grips Markets Post Monday Rally
India’s equity benchmarks saw a sharp downturn on Tuesday, as the Sensex plunged by 1,301 points (1.58%) to 81,128.87, while the Nifty dropped 341.50 points (1.37%) to 24,583.20 by 2:30 PM. The decline followed a strong rally on Monday, which many analysts attributed to short-covering and retail participation, rather than institutional buying. Market participants largely pointed to broad-based profit booking, as investors chose to lock in gains ahead of the release of the U.S. Consumer Price Index (CPI) inflation data for April, scheduled for Tuesday evening.
Highlights:
Sensex slumps 1,301 points; Nifty sheds 341 points amid heavy selling pressure.
Profit booking accelerates post Monday’s rally, ahead of U.S. CPI inflation data release.
Weak institutional flows on Monday rally raise concerns over market sustainability.
IT, Auto, FMCG Sectors Hit Hardest
The biggest drag on the indices came from the IT sector, where the Nifty IT index dropped close to 3% in intraday trading. Market heavyweights like Infosys, TCS, and HCL Technologies fell between 3–4%, with investors trimming positions amid earnings-related concerns and recent underperformance in U.S.-exposed tech counters. Similarly, auto and FMCG shares witnessed notable declines, contributing further to the selloff.
In contrast, pharma stocks bucked the trend. The Nifty Pharma index climbed 1.11%, with companies such as Granules India, Ajanta Pharma, IPCA Laboratories, Divi’s Labs, and Glenmark Pharma rising between 2–4%. The rally was driven by expectations that a recent executive order by U.S. President Donald Trump, aimed at curbing drug prices, would have minimal impact on Indian generic manufacturers.
Highlights:
Nifty IT index down nearly 3%, with Infosys, TCS, HCL Tech falling up to 4%.
Auto and FMCG sectors under pressure amid risk-off sentiment.
Pharma stocks outperform on expectations of limited impact from U.S. drug pricing reform.
Defence Stocks Shine on Indigenisation Push
Defence-related shares posted strong gains, amid renewed focus on domestic manufacturing of defence equipment. Shares of Hindustan Aeronautics (HAL), Bharat Dynamics, Bharat Electronics, and Garden Reach Shipbuilders jumped 4–7%, supported by statements from Prime Minister Narendra Modi reinforcing the government’s commitment to the ‘Make in India’ defence initiative. The sector has been in focus since the India-Pakistan ceasefire, with increasing interest in strengthening indigenous capabilities.
Highlights:
Defence stocks rally between 4–7% on government push for localised manufacturing.
PM Modi reaffirms ‘Make in India’ defence strategy amid rising geopolitical attention.
HAL, BEL, and BDL among top sectoral performers.
Retail and HNI-Led Rally Shows Fragility
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, Monday’s dramatic 916-point rally in the Nifty was not underpinned by robust institutional flows. Combined FII and DII buying amounted to only Rs 2,694 crore, indicating that the upswing was driven by short-covering, along with retail and HNI participation. He warned that the absence of strong institutional activity could limit further upside in the coming sessions.
This concern has already manifested in Tuesday’s pullback, with investors becoming cautious ahead of key global macro triggers. While foreign flows into Indian equities remain strong on a monthly basis, volatility is expected to persist until there is more clarity on U.S. inflation trends, interest rate outlook, and global risk sentiment.
Highlights:
Monday’s rally lacked strong institutional support—FIIs and DIIs net bought only Rs 2,694 crore.
Short-covering and retail buying were the primary drivers of the sharp upmove.
Limited institutional conviction may cap upside in the short term.
Broader Market Holds Resilience Amid Frontline Weakness
Despite the steep correction in the Sensex and Nifty, market breadth on the BSE remained positive. Out of a total of 3,613 stocks traded, 2,239 advanced, 1,277 declined, and 97 remained unchanged, suggesting continued interest in midcap and smallcap segments. The outperformance of select pharma and defence stocks also helped cushion the broader market impact.
Investors appeared to be rotating capital from largecaps to theme-driven midcaps, especially those aligned with government policy priorities or global macro tailwinds. This rotational trend may continue, particularly if frontline indices remain range-bound in the near term.
Highlights:
BSE market breadth positive with 2,239 stocks advancing vs. 1,277 declining.
Resilience seen in midcaps, pharma, and defence counters despite Nifty, Sensex weakness.
Capital rotation from largecaps to policy-aligned midcap themes underway.
