The Indian stock market benchmark indices, Sensex and Nifty 50, traded lower on Tuesday, weighed down by selling in IT stocks.

The Sensex dropped over 200 points, while the Nifty 50 was below 25,000 level. The Bank Nifty index gained nearly 1%, outperforming the frontline indices.

Broader markets also fell, as the Nifty Smallcap 100 and the Nifty Midcap 100 indices traded 0.1% lower each.

Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay

Among sectors, losses were seen in Nifty IT, Nifty Metal, Nifty FMCG and Nifty Oil & Gas, while Nifty Pharma, Nifty PSU Bank, Nifty Media and Nifty Private Bank were in the green.

Globally, Asian markets traded mostly higher, while the US stock market ended mixed last week, with the Nasdaq Composite Index posting a fourth consecutive weekly decline.

In this holiday-shortened week, market participants will watch out for inflation data in India, US and China, along with the developments in the US-Iran war, flow of foreign funds and the next leg of September-quarter earnings.

ALSO READ: Tata Steel Q2 Review: Goldman Sachs Hikes Target; HSBC, Jefferies Remain Bullish After Earnings Beat

Last week, the Indian stock market surged, with the benchmark Nifty rallying 8.6%, improving sentiments.

“A rare convergence of positive news for India - FIIs turning aggressive buyers, fair valuations, winding down of AI trade, dip in crude price, decline in US bond yields and steadily improving corporate earnings as reflected in Q2 numbers- triggered the rally,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments.

When the situation turns favourable, the market needs only a trigger to rally. This trigger was provided by the Democrat's victory in the US elections, which, in turn, caused fears of deceleration in AI spending and sharp correction in AI stocks, he added.

“The FII buying in India is likely to sustain paving the way for further rally in largecaps. It is important to understand that FII allocations track index weights during major market shifts,” Vijayakumar added.

Technical Outlook

Nifty 50 encountered selling pressure at elevated levels, pulling the index back below the crucial psychological mark of 25,000.

According to Ponmudi R, CEO of Enrich Money, the index needs to sustain a breakout above the 25,150–25,200 resistance zone to regain upward momentum and extend its advance towards higher levels.

“On the downside, 24,800 is expected to act as the immediate support, followed by the next crucial support at 24,600. Holding above these levels will be important to maintain the prevailing bullish structure,” he added.

Meanwhile, momentum indicators remain elevated, with the RSI hovering in the mid-70s, indicating strong bullish momentum but also suggesting overbought conditions and the possibility of intermittent profit-booking.

ALSO READ: Divi's Laboratories Q2 Review: Goldman Sachs, Jefferies, JPMorgan Raise Target Prices; Kotak Maintains Sell