Indian equity benchmarks traded lower on Monday after giving up early gains, as investors booked profits following a sharp rally over the previous seven sessions. The Sensex fell more than 500 points from its intraday high, while the Nifty slipped below the 24,950 mark, in a session that underlined how quickly sentiment can turn after a steep run-up.
At around 10:45 am, the Sensex was down 402.01 points, or 0.5 per cent, at 80,597.39, while the broader Nifty declined to 24,844.60, down 141.80 points or 0.57 per cent. The Sensex had surged 340.01 points, or 0.41 per cent, to 81,339.41 in early trade before reversing its gains. The Nifty also climbed 97.65 points, or 0.39 per cent, to 25,084.05 before slipping into negative territory.
The swing from the day's high to the morning lows captured the mood of the session: a market that opened with momentum and then met determined selling at higher levels.
Profit booking at higher levels emerged as the key factor behind the decline, with investors locking in gains after the recent sharp rally. The indices had gained around 10.5 per cent in seven consecutive sessions till Friday, marking their longest winning streak this year. Before Sunday's special Muhurat trading session, the Sensex had surged 7,781.99 points, or 10.62 per cent, over seven trading sessions, powering the strongest weekly rally since February 2021.
A correction after such a run was widely expected, and Monday's decline was the market's way of taking a breather.
The selling was led by information technology stocks. HCL Technologies and Infosys shares fell around 2 per cent each, while Power Grid, Bharti Airtel, Tata Consultancy Services, UltraTech Cement and Tata Steel shares fell more than 1 per cent each to lead the losses on the Sensex.
The Bank Nifty index held above the 59,000 level, providing some support, but the broader markets also reeled under selling pressure, with the Nifty Smallcap 100 and the Nifty Midcap 100 indices declining half a per cent each.
The weakness followed a subdued Muhurat trading session on Sunday, when the benchmark indices ended marginally lower in the special one-hour session marking the beginning of the Hindu calendar year Samvat 2083. The Sensex declined 28.62 points, or 0.04 per cent, to settle at 80,999.40, while the Nifty fell 43.95 points, or 0.18 per cent, to close at 24,986.40.
It was the first time since 2017 that the indices ended Muhurat trading in the red, snapping an eight-year Diwali winning streak. The session had started on a bullish note, with the Sensex climbing to an intraday high of 81,442.11, but it failed to sustain the rally as traders locked in profits following the seven-session surge.
Technical analysts attributed the decline to overbought conditions after the steep rally. Vatsal Bhuva, technical and derivative research analyst at LKP Securities, said the daily relative strength index indicated overbought conditions, suggesting the possibility of a mild retracement. He expects the 24,300 to 24,500 range to act as support for the Nifty, with resistance anticipated around 25,500.
Other analysts pointed to the 24,860 to 24,775 band as the downside marker, saying that as long as the index stays above that zone, upside attempts could be expected, with eyes on 25,400 to 25,700, February's congestion band.
Despite the day's decline, analysts remained broadly bullish on the market's medium-term prospects. V.K. Vijayakumar, chief investment strategist at Geojit Investments, said foreign institutional investor buying in India was likely to sustain, paving the way for a further rally in large-cap stocks.
The argument is that the factors behind the recent rally, including strong domestic inflows, improving corporate earnings and supportive global cues, have not gone away, and that a bout of profit booking is a healthy pause rather than a reversal.
The rally that preceded Monday's fall had been driven by a combination of factors. Domestic institutional investors had been steady buyers, foreign investors had returned to Indian equities after a period of selling, and expectations of strong corporate earnings had lifted sentiment across sectors. The seven-session surge added more than 10 per cent to the indices, a move that left many stocks trading at stretched valuations and made a correction almost inevitable.
Markets rarely rise in a straight line, and the sharper the rally, the more likely a pause becomes.
Muhurat trading itself is a symbolic session, held on Diwali to mark the beginning of the new Hindu calendar year. It is a short, ceremonial session in which traders traditionally make token purchases in the belief that it will bring prosperity in the year ahead. The fact that it ended lower this year, for the first time in nine years, was noted by market watchers as a sign that even festive sentiment could not overcome the urge to book profits after such a strong run.
Ponmudi R, chief executive of Enrich Money, an online trading and wealth-tech firm, said the modest consolidation reflected natural profit booking following an exceptional week of gains.
The broader market context also matters. Investors are awaiting key corporate earnings scheduled for the coming days, with marquee companies set to report results that will test whether the rally's foundations are solid. The market's direction in the near term is likely to depend on those earnings, on the flow of foreign institutional money, and on global cues, including the direction of crude oil prices and the stance of central banks overseas.
For retail investors, Monday's session carried a familiar lesson. A market that has risen more than 10 per cent in seven sessions is a market that owes its participants a pause, and the prudent response to a sharp rally is not to chase it higher but to wait for the correction to run its course. The indices remain well above their recent lows, the medium-term trend is intact, and the support levels identified by technical analysts are not far below current prices.
But the day's trading showed that the easy gains of the past week are over, and that the market will now need fresh triggers to move higher.
The Sensex and the Nifty have given back only a fraction of their recent gains, and the decline is modest in the context of the rally that preceded it. Whether Monday's fall marks the start of a deeper correction or merely a brief pause before the next leg higher will become clear in the sessions ahead. For now, the market has done what markets do after a steep climb: it has stopped, looked down, and taken a careful step back.
(Reporting based on Moneycontrol and The Economic Times.)