Bear Attack After a Three-Day Rally Leaves Dalal Street on Edge
Indian equity markets witnessed a sharp reversal on Thursday, as a bout of profit booking and weak global signals dragged benchmark indices lower, breaking a three-day winning streak that had lifted sentiment earlier this week.
The Sensex slipped about 500 points, while the Nifty hovered near the 25,600 mark in midday trade, reflecting a cautious undertone across Dalal Street. The decline was not limited to frontline stocks; broader markets also came under pressure, indicating that traders were quick to lock in gains after the recent rally.
Market participants said the pullback was partly inevitable after the strong run-up driven by optimism around the India–US trade agreement, but the intensity of selling showed that nerves remain fragile at higher valuations.
What Drove Today’s Market Fall Across Segments
Several triggers converged to pressure the indices and reshape short-term sentiment:
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Metal stocks led losses as global metal prices softened amid a stronger dollar, which makes commodities costlier for other currency holders. The metal index, which had surged in recent sessions, corrected sharply.
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Profit booking intensified after the recent rally, with most sectoral indices trading in the red except IT and PSU banks.
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Weak global cues from Asian and US markets dampened risk appetite. Major Asian indices traded lower, and US markets had closed mostly in the red overnight.
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Muted FII buying reduced a key pillar of support. Foreign investors were only marginal net buyers in the previous session, a sharp drop from the strong inflows seen earlier.
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RBI policy uncertainty kept traders cautious ahead of the monetary policy outcome due Friday.
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Rise in India VIX signaled higher fear and expectations of volatility.
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Derivatives expiry-related volatility added to intraday swings as positions were unwound or rolled over.
Together, these factors created a risk-off mood, especially after the indices had already rallied nearly 4 percent over the previous three sessions.
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Here’s What Happened Today and Why Traders Reacted
At around midday, the Sensex was down over half a percent, while the Nifty also lost over half a percent, showing a synchronized decline. Mid-cap and small-cap indices fell even more, highlighting broader risk aversion.
Among major stocks, metal and auto names featured among the top laggards, while select defensives and banking stocks showed resilience. Market breadth remained negative, with declining shares outnumbering advancing ones.
Traders reacted quickly to:
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Global market weakness
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Signals of slowing foreign flows
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Elevated volatility readings
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Caution ahead of RBI commentary
For short-term participants, the combination of expiry day and policy uncertainty created an environment favoring quick trades rather than fresh long positions.
Expert Views Signal a Market in Consolidation Mode
Market strategists suggested that the indices may be entering a consolidation phase rather than a deep correction.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said:
“There are a few near-term market trends that are significant. The Nifty appears to be in a consolidation phase without big moves at the index level. However, there are big changes within the Nifty stocks, with big declines in IT stocks following the US IT sell-off spilling into India.”
Brokerage commentary also indicated that near-term direction could hinge on RBI’s stance and further clarity on the India–US trade deal.
A note from a domestic brokerage highlighted:
“The market direction is likely to depend on RBI’s upcoming policy announcement and commentary as well as details on the newly unveiled trade deal with the US.”
Technical Signals Show Key Levels to Watch
Technical analysts pointed to a mixed setup. While a bullish candlestick pattern had formed recently, selling pressure is emerging at higher levels. India VIX above 12 suggests volatility may stay elevated.
Key levels flagged by analysts include:
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Upside resistance: Around 25,800 on Nifty and near the 50-day SMA
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Higher targets if crossed: Zone toward 25,900–26,000
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Downside supports: Around 25,600, then 25,500–25,350 if selling deepens
Shrikant Chouhan of Kotak Securities said:
“Currently, the market exhibits a non-directional character; therefore, level-based trading would be the ideal strategy for day traders.”
What This Means for Investors and Their Portfolios
For investors, today’s fall serves as a reminder that markets rarely move in a straight line. After a sharp rally, corrections and consolidation are healthy, especially when valuations are still considered expensive by many analysts.
Portfolio impact and takeaways:
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Short-term portfolios may see mark-to-market pressure, especially in metals and high-beta stocks.
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Long-term investors may use dips selectively, focusing on quality and earnings visibility.
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High volatility suggests avoiding excessive leverage.
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Diversification across sectors can cushion sudden swings.
In the coming days, RBI policy signals, global market trends, and FII flows will be crucial in determining whether this is a brief pause or the start of a deeper pullback.
For now, Dalal Street appears to be catching its breath after a fast run-up — and reminding traders that sentiment can turn as quickly as it builds.
