Sensex, Nifty Reverse Losses As FII Buying, Global Cues Aid Recovery

Indian equity benchmark indices reversed early losses and ended higher on Tuesday, supported by value buying in beaten-down stocks and purchases at lower levels. The Sensex recovered more than 500 points from the day's low, while the Nifty closed above the psychologically important 24,300-mark.

At close, the Sensex rose 286.98 points, or 0.37%, to 77,656.09, while the Nifty gained 115.50 points, or 0.48%, to 24,334.55. Market breadth remained mixed, with 1,970 shares advancing, 2,146 declining and 158 unchanged.

FII Buying Supports Market

Foreign institutional investors (FIIs) turned buyers on Monday, purchasing equities worth ₹1,181.66 crore and snapping a two-session selling streak.

Asian markets also traded higher, with South Korea's Kospi, Shanghai's SSE Composite, Hong Kong's Hang Seng and Japan's Nikkei 225 quoting in positive territory. Wall Street futures were also up as much as 0.6%, signalling a firm start for US equities.

Vinod Nair, Head of Research, Geojit Investments, said the much-anticipated US sanctions against Iran fell short of market expectations, leading crude oil prices and bond yields to moderate from their recent peaks.

"This relief in energy costs aided a moderately positive close today on the monthly expiry day," Nair said.

Monthly Expiry Adds Volatility

Investors also remained focused on the Nifty 50's first monthly derivatives expiry under the new closing auction session (CAS) for stocks with futures and options contracts.

The new mechanism can influence closing prices by determining an equilibrium price through an auction, potentially adding to volatility around derivatives expiry.

The effectiveness of CAS will be tested not only during the Nifty 50 monthly expiry but also when the latest MSCI index rejig takes effect after market close on August 31, Reuters reported, quoting traders.

Nair said healthcare and financial sectors outperformed the broader market as investors rotated into defensive and domestic-oriented sectors amid signs of some stability in the domestic bond market.

"Market participants are now awaiting upcoming inflation data and comments from the Fed Chair later this week for better clarity on the inflation and interest rate outlook," he said.

However, near-term caution is expected to persist for Indian equities as unresolved US-Iran tensions keep oil prices and bond yields relatively elevated, leaving investors sensitive to sudden shifts in the Middle East geopolitical landscape.