Benchmark stock market indices began Tuesday on a high note, driven by early optimism across sectors. However, the initial euphoria faded as the day progressed, with investors turning cautious amid looming uncertainties surrounding the U.S.-India trade situation. By the closing bell, the S&P BSE Sensex had pared most of its gains, ending just 32.81 points higher at 78,017.19 — a sharp reversal from its nearly 700-point rally earlier in the day. Similarly, the NSE Nifty 50 closed with a modest uptick of 10.30 points at 23,668.65, reflecting a market in wait-and-watch mode.
Vaibhav Vidwani, Research Analyst at Bonanza, remarked that despite the flat closing, IT stocks remained a bright spot, continuing their recent streak of outperformance. Companies heavily reliant on U.S. revenue — such as HCL Technologies, Infosys, and Persistent Systems — posted gains between 1% and 3%. This lifted the Nifty IT index by 1.3%, making it the day’s strongest sectoral performer. The rally in IT stocks was fueled by a strengthening dollar, improving global demand for technology services, and expectations that the upcoming earnings season might paint a more resilient picture for the sector.
Financial stocks displayed a more mixed performance. The broader financial sector eked out a modest 0.1% gain, but the Nifty Bank index slipped 0.2%, weighed down by weakness in public sector banks. The Nifty PSU Bank index plunged 1.7%, dragged lower by sharp declines in key state-run lenders like Central Bank of India, UCO Bank, Indian Overseas Bank, Bank of Maharashtra, Canara Bank, and Union Bank of India — all of which tumbled between 3% and 5%. HDFC Bank was one of the few notable gainers, rising 1.1%, while ICICI Bank edged down 1%. Analysts attributed the underperformance in PSU banks to concerns over asset quality, slower-than-expected credit growth, and rising borrowing costs that could squeeze net interest margins.
Meanwhile, cement stocks staged an impressive rally, driven by a bullish upgrade from global brokerage UBS. The firm cited expectations of a demand revival in FY26, supported by infrastructure development and a pickup in residential construction. Ultratech Cement soared 3.5%, while ACC, Dalmia Bharat, and Ambuja Cements all logged intraday gains of up to 3%. This renewed investor confidence in the sector reflects optimism around India’s growing infrastructure push and potential housing market recovery.
However, the broader market couldn’t sustain the early gains. Profit booking hit the midcap and smallcap segments particularly hard. The Nifty Midcap 100 fell 1.1%, while the Nifty Smallcap 100 dropped 1.6%, as investors locked in profits after recent rallies. Analysts noted that valuations in the broader market had become stretched, prompting a pullback despite strong underlying fundamentals.
Market strategist Vinod Nair pointed out that in the short term, sentiment is expected to stay cautious. "Investors are awaiting clarity on the evolving U.S.-India trade talks, particularly regarding potential reciprocal tariffs. This uncertainty has kept institutional investors on the sidelines," he explained. Nair also emphasized the importance of the upcoming corporate earnings season, which could provide key insights into how companies are navigating inflationary pressures, global volatility, and evolving domestic demand.
Adding to this cautious outlook, foreign institutional investors (FIIs) maintained a net selling stance amid global economic jitters and ongoing geopolitical tensions. Domestic institutional investors (DIIs), however, continued to support the market, helping prevent deeper losses. DII buying, fueled by steady inflows into mutual funds and insurance schemes, remains a pillar of strength for Indian equities, especially in the face of persistent FII outflows.
Economists and market experts are also closely watching macroeconomic indicators. The Reserve Bank of India’s potential shift toward rate cuts later this year, alongside a stabilizing rupee, could lend further support to sectors reliant on borrowing — including infrastructure, real estate, and capital goods. A softer interest rate environment could stimulate corporate borrowing and consumer demand, fostering broader market recovery.
Looking ahead, analysts predict a choppy, range-bound market until clearer signals emerge from global developments, particularly around U.S.-India trade negotiations. Any positive breakthrough in the discussions could reignite a rally, especially for export-centric sectors like IT, pharmaceuticals, and textiles. Conversely, prolonged uncertainty or an escalation in tariffs could amplify volatility, prompting further corrections.
For now, investor focus is expected to shift toward the upcoming corporate earnings season, inflation data, and global economic cues. With hopes pinned on a resolution to tariff tensions and optimism around easing domestic inflation, the market could witness a fresh wave of buying if earnings surprises lean positive.
