Nifty Tops 24,700, Sensex Recovers 500 Points After 1,282-Point Drop on Tuesday

The Indian stock markets opened strongly on Wednesday, driven by positive global sentiment and a sharp drop in retail inflation. The benchmark indices Nifty 50 and Sensex saw a healthy start, with Nifty 50 crossing the 24,700 mark and the Sensex climbing over 500 points in early trade.

Retail Inflation Drops to Multi-Year Low

The rally comes as investors respond positively to April’s consumer inflation data, which showed India’s retail inflation cooling to 3.16% — its lowest level since July 2019. This sharp fall was mainly due to easing food inflation, particularly a contraction in vegetable prices.

At 7:50 am, the GIFT Nifty was trading nearly 100 points, or 0.4%, higher, hinting at a green start for the frontline indices. Source: Moneycontrol

Global Sentiment Lifts Investor Confidence

Global cues also supported sentiment. Overnight in the U.S., stock indices surged after inflation data came in softer than expected. The S&P 500 rose 0.72%, and the Nasdaq Composite gained 1.61%, easing U.S.-China trade tensions added to investor optimism. However, the Dow Jones Industrial Average slipped 0.64%, dragged down by UnitedHealth after the company withdrew its annual forecast and its CEO stepped down. Source: Moneycontrol

Asian Markets Remain Cautious

Asian markets opened cautiously, trading in narrow ranges as investors sought direction after U.S. benchmarks erased their 2025 losses. The recent softness in inflation and improved trade sentiment appear to have relieved global investors. Source: Moneycontrol

Indian Stock Market Fell Sharply on Tuesday

After delivering their biggest single-day rally in four years on Monday, May 12, with both the Sensex and Nifty 50 surging nearly 4%, Indian benchmark indices reversed course on Tuesday, May 13, amid mixed global and domestic cues.

Monday’s rally was driven by a wave of positive developments, including a ceasefire between India and Pakistan and optimism around a potential US-China trade deal, which significantly boosted investor sentiment. However, this momentum proved short-lived. On Tuesday, the markets saw a sharp correction. The Sensex plunged 1,386 points (1.7%) during the session to hit an intraday low of 81,043.69, while the Nifty 50 dropped 377 points (1.5%) to an intraday low of 24,547.50.

Source: BSE

Interestingly, mid and small-cap stocks showed resilience. The BSE Midcap index edged up 0.17%, and the Smallcap index rose 0.99%, outperforming the large-cap-heavy benchmarks.

The total market capitalisation of all BSE-listed companies dropped from ₹432.56 lakh crore to ₹431 lakh crore, wiping out nearly ₹1.5 lakh crore in investor wealth in a single session. Source: LiveMint

Why Did the Indian Stock Market Fall?

According to market experts, the steep correction can be attributed to five major factors:

1. Tariff Tensions Resurface

India has approached the World Trade Organization (WTO) seeking permission to impose retaliatory tariffs on the US, following lingering disputes over US duties on steel and aluminium during Donald Trump’s presidency.

This development has rekindled trade war fears, reminding investors that geopolitical and trade risks are far from over, despite ongoing bilateral negotiations.

2. Profit Booking After a Sharp Rally

The Indian stock markets had surged nearly 4% in the previous session, largely driven by short-covering and retail investor activity, following a temporary easing of tensions between India and Pakistan. Experts suggest that institutional participation in the rally was limited. The sharp surge in Nifty was not led by institutional activity. FII and DII buying was only ₹2,694 crore, indicating it was largely HNIs and retail-driven, and such rallies are often short-lived.

This sharp uptick led to profit-booking, especially by retail investors, contributing to Tuesday’s market slide.

3. US-China Trade Deal Concerns

While a trade deal between the US and China may be positive globally, some Indian market experts see it as a potential negative for India. There are concerns that a resolution between the two largest economies may shift foreign investment flows back to China, reviving the ‘sell India, buy China’ narrative.

4. Persistent Indo-Pak Tensions

Despite a brief easing of tensions, concerns over the India-Pakistan situation still affect market sentiment. After Prime Minister Narendra Modi issued a strong warning to Pakistan in his address on Monday, fears of possible retaliation returned.

Investor anxiety grew further after reports of 10–12 drones being intercepted in Samba, leading to a blackout in parts of Jammu for the fourth night in a row. This ongoing geopolitical tension continues to impact investor confidence.

5. Lack of Fresh Market Catalysts

Markets currently lack new domestic triggers to sustain an uptrend. The positive outlook for India’s economy and the anticipated Q1FY26 earnings rebound appear already priced in. This has prompted retail investors to shift their focus toward mid- and small-cap stocks in search of better returns. Source: LiveMint

Despite the correction, technical indicators suggest that the overall market structure remains strong. Analysts believe that the uptrend may remain intact if Nifty holds above 24,400.

Market analysts suggest that recent declines in the market may be seen as opportunities for investment, as some investors are choosing to buy during these lower points. The current level of resistance is identified between 24,800 and 25,000. A solid closure above this range might lead to renewed buying interest and push the market toward 25,200 to 25,300. On the other hand, if the market falls below 24,500, it could result in some investors taking profits, which may create another opportunity for entry near 24,370. Source: Moneycontrol

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