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Benchmark indices ended with little change on Tuesday after surging close to 1 per cent. Analysts said that with 10-year US bond yields once again moving past 4 per cent, investors have dimmed the optimism around aggressive rate cuts by the Federal Reserve this year.
They said the US inflation data due on Thursday and earnings announcements by large companies would help dictate further market direction. After hitting an intra-day high of 72,035, the Sensex finished at 71,386, with a gain of 31 points, or 0.04 per cent. The Nifty came off 180 points from the day's high of 21,724 to close at 21,545, with a gain of 32 points.
The upmove in intra-day trade followed sharp gains in the US markets, particularly technology stocks. However, the tech-heavy Nasdaq index, which gained 2.2 per cent on Monday, saw reversing gains in Tuesday's trades. Weak openings in the European market also prompted investors to take some profits off the table.
"Market optimism about potential softening of US inflation is driving expectations of near-term rate cuts, bolstering overall sentiment. But in-between profit booking is emerging due to mixed cues from Asian markets and high valuation concerns," said Vinod Nair, Head of Research, Geojit Financial Services.
Analysts say the market remains above key support levels despite the sharp pullback from the day's high. Indian equities had gained in the last year amidst hopes of rate cuts by the Federal Reserve, strong macro numbers, corporate earnings in line with expectations, and state election results, which renewed hopes of the regime and policy continuity.
"The Nifty witnessed an extremely volatile day of trade. It witnessed positive price action during the first half, while a sharp fall during the second half took away all the gains. Amid the volatile price action, the Nifty is still within the broad range of 21,850-21,500. On the way down, multiple support parameters in the form of the 20-day moving average 21,453 and 50 per cent Fibonacci retracement level of 21,406 shall provide a cushion in case of a deeper correction," said Jatin Gedia – Technical Research Analyst, Sharekhan by BNP Paribas.
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The market breadth was favourable, with 2,241 stocks advancing and 1,606 declining.
Half of the Sensex stocks gained. Larsen and Toubro gained 1.5 per cent and were both the best-performing Sensex stock and the biggest contributor to the Sensex gain. Bharti Airtel gained 1.5 per cent; Tata Motors rose 1.3 per cent. HDFC Bank, which declined 0.8 per cent, was the biggest drag on the Sensex, followed by Reliance Industries, which fell 0.2 per cent. Realty stocks gained the most, and its sectoral index on BSE rose 2.5 per cent.
