Sensex, Nifty Turned Red After Positive Start: The Profit Booking Effect Explained

Indian equity benchmark indices ended marginally lower on Thursday after a highly volatile session, as early gains were wiped out due to profit booking and expiry-led swings.

The Sensex closed down 122.56 points or 0.16% at 77,988.68, while the Nifty declined 34.55 points or 0.14% to settle at 24,196.75. Market breadth remained positive, with 2,688 stocks advancing, 1,468 declining and 128 unchanged, indicating underlying strength despite headline weakness.

The session witnessed sharp intraday swings, with the Sensex moving in a wide range of 1,055.39 points between a high of 78,730.32 and a low of 77,674.93. Similarly, the Nifty traded within a 298.15-point band, hitting a high of 24,400.95 and a low of 24,102.80, reflecting heightened volatility on the weekly derivatives expiry.

Profit Booking, Expiry Volatility Drag Markets Lower

Markets opened on a strong note tracking global cues but failed to sustain gains as selling pressure intensified through the day. The key trigger behind the decline was profit booking after the recent rally, with investors locking in gains across sectors.

Auto and FMCG stocks led the losses. Shares of Britannia Industries and Nestle India fell up to 1%, while Hero MotoCorp and Eicher Motors declined up to 1%, weighing on the indices due to their heavy weightage.

Banking stocks also remained under pressure, with HDFC Bank among the top laggards along with ONGC, HDFC Life, Titan Company and Apollo Hospitals. On the other hand, Hindalco Industries, Trent, Adani Enterprises, Adani Ports and Eternal were among the key gainers.

Sectorally, IT, capital goods and metal indices gained around 1% each, while auto, banking and oil & gas indices ended lower.

Broader Markets Outperform Benchmarks Again

Despite weakness in headline indices, broader markets continued to show resilience. The Nifty Midcap index rose 0.6%, while the Smallcap index gained nearly 1%, indicating sustained buying interest beyond large caps.

According to Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, the broader market maintained strong momentum. He noted that both midcap and smallcap indices outperformed with gains of 0.63% and 0.89%, respectively, while market breadth remained firmly positive with a majority of stocks closing higher.

Shah added that the Nifty opened with a gap-up but failed to hold higher levels due to persistent profit-taking throughout the session. Although a late recovery was seen after the index hit an intraday low of 24,102, it still ended marginally lower, marking the second consecutive close above its 50-day EMA, indicating some underlying strength.

Rupak De, Senior Technical Analyst at LKP Securities, said the index struggled to hold key resistance levels. "Following a gap-up start, the index slipped as it failed to sustain above 24,300, leading to an intraday decline towards 24,100," he said, adding that the index eventually closed near its 50 EMA.

He noted that near-term sentiment remains uncertain. "If the Nifty moves decisively above 24,300, a sustained rally could follow. Otherwise, continued profit booking may drag the index towards the 24,000 mark," he said.

Global Cues, Oil and Currency in Focus

Vinod Nair, Head of Research at Geojit Investments, said markets remained cautious amid global uncertainties. "The domestic market opened positively but closed marginally lower on the weekly expiry day as investors booked profits after recent gains," he said.

He added that markets are closely watching developments around US–Iran negotiations, which will guide the near-term trend. "A higher-than-expected WPI inflation print weighed on auto and consumption stocks, while IT stocks found support from improving confidence in AI-led demand. Banking stocks remained under pressure due to mixed earnings expectations, while metal stocks gained on a softer dollar and positive data from China," Nair said.

Meanwhile, crude oil prices edged higher, with Brent rising 0.95% to $95.81 per barrel and WTI gaining 0.87% to $92.07. The Indian rupee strengthened by 18 paise to close at ₹93.19 per dollar, supported by stable global cues.

Today's market session highlighted the market's inability to sustain higher levels amid profit booking and expiry-led volatility. While broader markets remained resilient, benchmark indices reflected caution, with near-term direction likely to depend on global developments and key technical levels.