Sensex falls 750 pts from day’s high, Nifty below 24,850: Profit booking among key factors behind market decline

The benchmark equity indices Sensex and Nifty traded lower on Monday after giving up early gains, as investors booked profits after a sharp rally over the previous seven sessions.

At around 10:45 am, the Sensex was down 402.01 points or 0.5 percent at 80,597.39, while the broader Nifty declined to 24,844.60, down 141.80 points or 0.57 percent.

The Sensex had surged 340.01 points or 0.41 percent to 81,339.41 in early trade before reversing gains. The Nifty also climbed 97.65 points or 0.39 per cent to 25,084.05 before slipping into negative territory.

The broader markets also remained subdued, with the Nifty Smallcap 100 and Nifty Midcap 100 declining 0.11 percent and 0.12 percent, respectively.

Key factors behind market decline

1) Profit booking: Profit booking at higher levels emerged as a key factor behind the market decline, with investors booking gains after the recent sharp rally.

The indices had gained around 10.5 percent in seven consecutive sessions till Friday, marking their longest winning streak this year. The rally was supported by strong foreign fund inflows, easing crude oil prices and unwinding of the global AI trade.

"After a sharp weekly advance and a subdued Muhurat trading session, the market enters the new week facing a key test of momentum, with investors likely to weigh the scope for further gains against the prospect of near-term profit-taking.

"The immediate focus will be on whether underlying buying interest can sustain the recent advance, particularly against the backdrop of lingering global concerns surrounding the AI trade and ahead of Thursday's CPI data, which could provide the next significant directional cue for domestic equities," Ponmudi R, CEO of Enrich Money, an online trading and wealth-tech firm, said.

2) Selling in IT shares: Information technology stocks were among the major laggards, with the Nifty IT index declining 1.3 percent amid selling in heavyweight IT companies.

The weakness followed reports that a bipartisan US Senate bill could fast-track the expansion of AI data centres and power infrastructure, potentially easing key bottlenecks in their development. According to a report by The Verge, a vote on the bill could take place as early as next week.

The proposed legislation raised concerns among investors that faster expansion of AI infrastructure in the US could intensify competition for Indian firms in AI-led technology services and data centre-related work. It also fuelled concerns that accelerated AI adoption could increase pressure on traditional IT services and business models.

All 10 constituents of the Nifty IT index were trading lower. Mphasis led the losses, declining around 3 percent, while HCL Technologies, Infosys, Coforge and TCS fell between 1 percent and 2 percent.

3) Technical outlook: Anand James, Chief Market Strategist at Geojit Investments, said the possibility of a mean reversion had increased, although market momentum could still surprise investors.

"We will keep the 24,860-24,775 as the downside marker, as long as above which, upside attempts may be expected, eying 25,400-25,700, February's congestion band. Alternatively, inability to float above 24,775 could call for 24,400," he said.

Among stocks, Divi's Laboratories gained 4.6 percent, extending its 7.5 percent rise during Sunday's special Muhurat trading session, after the drugmaker reported a 64 percent year-on-year increase in quarterly profit. The gains helped lift the Nifty Pharma index by 1.6 percent.

On Sunday, benchmark indices Sensex and Nifty had ended marginally lower during the special Muhurat trading session marking the beginning of Samvat 2083, as investors booked profits following the seven-session rally.

The Sensex declined 28.62 points or 0.04 percent to settle at 80,999.40, while the Nifty fell 43.95 points or 0.18 percent to close at 24,986.40.