Sensex Falls 210 Points, Nifty Slips Below 24,650 Amid F&O Volatility, RBI Caution

Indian benchmark indices ended lower in a volatile trading session on Tuesday, with the Nifty closing below the 24,650 mark as investors remained cautious amid disruptions from the new F&O closing mechanism and ahead of the Reserve Bank of India's monetary policy decision.

The Sensex fell 210.08 points, or 0.27%, to close at 78,428.95, while the Nifty declined 159.40 points, or 0.64%, to 24,614.90. Market breadth remained almost evenly balanced, with 2,030 stocks advancing, 2,037 declining and 174 remaining unchanged.

Grasim Industries, HDFC Life, Max Healthcare, Bajaj Auto and Reliance Industries were among the biggest losers on the Nifty, while Hindalco, Trent, Apollo Hospitals, Jio Financial Services and Eternal ended as the top gainers.

Broad-Based Selling Across Sectors

Selling pressure was visible across most sectoral indices. Except for Nifty Metal and Nifty Media, all major sectors ended in the red.

Information Technology, Oil & Gas, Realty, Infrastructure, Private Bank, Consumer Durables and FMCG indices declined between 0.5% and 2%. In the broader market, the Nifty Midcap index fell 0.3%, while the Nifty Smallcap index edged 0.2% higher.

The Indian rupee ended marginally weaker at 95.38 against the US dollar, compared with Monday's close of 95.34.

F&O Closing Mechanism Triggers Volatility

Vinod Nair, Head of Research at Geojit Investments, said Tuesday's weekly expiry, coupled with the implementation of the new mechanism for determining F&O closing prices, distorted market trends and resulted in heightened volatility.

He said the divergence between the closing prices of Nifty stocks and the index, along with the gap between the Nifty and Sensex, indicates that the new system is experiencing initial operational issues. According to Nair, this led to forced square-offs, particularly by retail investors, during the final 15-minute derivatives trading window.

He added that these appear to be early teething issues rather than structural concerns and are likely to be addressed by exchanges and the market regulator. Despite the near-term volatility, Nair said the broader economic and financial outlook remains strong, with investors closely tracking developments around the Strait of Hormuz and the RBI's policy meeting for cues on inflation, liquidity and market direction.

Rupee Outlook Hinges On RBI, Crude

Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, said the rupee traded with a positive bias during the session, supported by continued FII inflows and improving sentiment following relatively positive developments surrounding the US-Iran situation.

However, he noted that higher crude oil prices capped further gains by keeping concerns over India's import bill alive. Going forward, Trivedi said the rupee will take direction from crude oil prices, the US Dollar Index, FII flows and geopolitical developments, while the RBI's policy decision and forward guidance will remain the key near-term trigger. He expects the rupee to trade in the 95.00-95.75 range in the near term.