The benchmark indices fell for the third straight day on profit booking, following a rebound after India and Pakistan agreed to a ceasefire to end the four-day military conflict that stemmed from Operation Sindoor. 

On Tuesday, the Nifty 50 index fell 1.05% or 261.55 points to 24,683.9, while the Sensex 30 slipped 1.06%, its sharpest decline in five days, to end at 81,186.44. 

The market had rallied almost 5% from 24,008 on Friday (9 May), a day before the ceasefire, to a high of 25,116.25 on 15 May. From there, Nifty has fallen 0.08% and Sensex has declined 0.15% on profit booking. 

All the Nifty sectoral indices ended lower on Tuesday. The Nifty Auto index fell the most, closing 2.17% down, the India Consumption index dropped 1.77%, and the Nifty Financial Services index closed 1.73% lower. The Nifty Midcap 100 index settled 1.62% lower. 

The market sentiment remained negative on Tuesday, with 42 of 50 Nifty constituents ending in the red. The BSE market capitalisation fell by ₹5.4 trillion to reach ₹43.82 trillion. 

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Of the 2,969 stocks traded on the NSE, 1974 declined and 915 advanced. 

Fund managers said that much of the negatives, including geopolitical tensions and global tariff uncertainties and earnings disappointments, were priced in. But with Moody’s downgrading the US, a selloff in emerging market assets by foreign portfolio investors (FPIs) amid rising US bond yields could crimp the short-term sentiment. 

“When US bond yields go up, it’s always negative for India and for emerging markets because the cost of debt is moving up,” said Christy Mathai, fund manager-equity at Quantum Asset Management Co. In such cases, investors could be better off investing in local currency and local bonds as opposed to investing in emerging markets, he said.

Sachin Relekar, senior equity fund manager at Axis Mutual Fund, said, “We believe that macro headwinds are receding.” The recent geopolitical issue with “our neighbouring country seems to be behind us”, he said. There were concerns around trade and tariffs, which were steep when proposed, but the tone of negotiations—especially with China and potentially with India too—now seems more positive, he said.

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“We still need to see the final details, but it doesn’t look as bad as it did around before and, hence, we believe that the two issues are less of a concern going forward,” Relekar said.

Most of the earnings downgrades that had to happen have happened and there is not much room for the earnings to go down further, according to Mathai. The earnings season for Q4FY25 has not been that weak and was on the expected lines, he said. “From hereon, we might see an 11% earnings growth for FY25-26.” 

FIIs have been net buyers in Indian equity markets for the last five days with inflows of ₹15,262 crore. 

Asian indices closed higher with Hong Kong’s Hang Seng ending 1.49% up and Japan’s Nikkei 225 settling 0.8% above the previous close. 

And read | Nifty logs highest close in 7 months as conflict fears recede. But volatility lingers.