Indian equity markets experienced a reversal of fortune on Tuesday, with benchmark indices slipping into negative territory despite opening on a positive note. The early optimism surrounding U.S. trade developments was quickly overshadowed by weakness in FMCG and IT stocks, leading to broad-based selling pressure.

Market Performance Overview

By 9:30 a.m., the market sentiment had shifted dramatically from the opening bell. The benchmark indices reflected this change in investor mood:

The decline marked a sharp contrast to the previous session's performance, where both the Sensex and Nifty had gained roughly 0.4% on trade negotiation optimism.

Sectoral and Stock Performance

Despite the overall market decline, certain stocks managed to buck the trend. On the 30-stock Sensex, several companies posted gains:

These stocks advanced between 0.4% and 3.00%, providing some support to the broader market. The IT sector showed resilience with the index rising 0.6%. Tata Consultancy Services edged up 0.2% while HCL Technologies climbed 1.00% after both companies reported modest revenue beats for the December quarter.

The market breadth remained relatively positive, with small-cap and mid-cap indices each adding about 0.4%, indicating that the selling pressure was primarily concentrated in large-cap stocks.

Expert Market Analysis

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, emphasized the ongoing influence of geopolitical developments on market sentiment. He highlighted President Trump's tariff policies as a key factor, noting that "Trump's weaponisation of tariffs has already impacted global trade and particularly countries which have been targeted with penal tariffs."

Vijayakumar pointed to Trump's latest declaration about imposing 25% tariffs on countries trading with Iran as evidence of continued policy uncertainty. He described the current U.S. administration's approach as "unprecedented, unstable, unpredictable behaviour" that will continue to weigh on markets.

The expert also noted the importance of U.S.-India trade relations, referencing the previous day's market bounce when U.S. ambassador Sergio Gor declared that talks would resume as early as January 13th. Looking ahead, Vijayakumar indicated that Q3 results would drive stock-specific action in the near term.

Currency and Commodity Impact

The Indian rupee faced pressure in early trading, slipping 5 paise to 90.22 against the U.S. dollar. This decline was attributed to multiple factors:

• Firmer greenback strength
• Rising crude oil prices
• Continued foreign fund outflows

The dollar index gained 0.11% to 98.73, reflecting broader U.S. currency strength. Oil prices also contributed to market concerns, with Brent crude futures rising 28 cents or 0.4% to $64.15 per barrel, trading near a two-month high due to renewed anxiety over Iran and supply disruption risks.

Market Outlook

The current market environment reflects a complex interplay of domestic and international factors. While trade negotiation prospects with the U.S. provide some optimism, ongoing geopolitical uncertainties and sectoral weakness continue to create volatility. Investors remain focused on upcoming quarterly results and policy developments that could influence market direction in the coming sessions.

Indian equity markets opened on a cautious note on Tuesday, with benchmark indices declining moderately amid fresh geopolitical concerns and persistent foreign fund selling. The BSE Sensex and NSE Nifty pared part of Monday's sharp rebound as investors turned wary of potential trade policy implications.

Market Performance

At 09:33 am, both indices were trading lower by approximately 0.2%, reflecting investor caution in early trade.

Despite the headline index pressure, market breadth remained positive, indicating selective buying interest across the broader market.

Tariff Concerns Impact Sentiment

The muted opening came after Trump announced that countries doing business with Iran would face a 25% tariff, reviving concerns around trade policy weaponization. This development particularly affects India, which has been among Iran's key trading partners in recent years. India exports items such as rice, tea, medicines and textiles to Iran, while importing dry fruits and chemicals from the country.

The announcement tempered the optimism from Monday's session, when markets had snapped a five-session losing streak on hopes of progress in India-US trade talks.

Sectoral and Stock Performance

Sectoral performance showed mixed trends in early trade. Energy, metals and PSU banking stocks provided some support to the market, while IT, auto and consumer durables stocks traded lower.

Top Nifty Gainers:

• ONGC
• Tech Mahindra
• Hindalco Industries
• HDFC Bank

Top Nifty Laggards:

• Larsen & Toubro
• Dr Reddy's Laboratories
• HCL Technologies
• Bharti Airtel

Volatility remained elevated with India VIX rising close to 2%, reflecting lingering nervousness after last week's sharp correction.

Institutional Flows

Institutional activity continued to be a key market driver, with contrasting flows from foreign and domestic investors.

Foreign institutional investors extended their selling streak to a sixth consecutive session, while domestic institutional investors continued providing market support, helping cushion the broader market impact.

Technical Outlook

Analysts indicate that Nifty's ability to hold above the 25,650-25,700 zone will be crucial in the near term following Monday's rebound. A sustained move above 25,800 could open the door for further recovery towards the 25,900-26,000 zone, while a slip below recent lows may revive downside pressure. With Q3 earnings underway and geopolitical developments in focus, participants expect stock-specific action to dominate in upcoming sessions.