Mumbai: Indian equity benchmarks opened on a weak note on Tuesday, defying expectations of a positive start even as India and the European Union edged closer to unveiling a long-pending trade agreement. After reopening post the Republic Day break, Dalal Street extended its recent downtrend, reflecting investor caution rather than celebration.
In early trade, the Sensex declined by over 400 points while the Nifty shed nearly 100 points. Although both indices trimmed losses within the first hour and moved closer to flat levels by around 9:40 am, sentiment on the Street remained guarded.
The muted opening came despite reports that negotiations between India and the EU on a comprehensive trade pact—years in the making—have been wrapped up, with a formal announcement expected later in the day. The agreement has been projected as a landmark move at a time when global trade relationships are under strain.
Auto stocks drag indices
The sharp early decline was largely driven by losses in automobile stocks. Market participants reacted to reports suggesting that India may significantly lower import duties on European cars as part of the trade deal. According to a Reuters report, tariffs could be reduced to around 40%, a move seen as opening up India’s heavily protected auto market.
The prospect of increased competition weighed heavily on domestic manufacturers. Mahindra & Mahindra fell about 4% in early trade, emerging as one of the biggest laggards and pulling the Nifty Auto index down by nearly 2%. Other auto counters also traded in the red, adding pressure to the broader market.
Foreign outflows add to pressure
Beyond sector-specific concerns, continued selling by foreign institutional investors (FIIs) kept markets under stress. Analysts noted that persistent outflows have capped any meaningful recovery in recent weeks.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, pointed out that FIIs have sold equities worth roughly Rs 40,000 crore in January so far. He said this sustained selling has been a major factor behind the market’s subdued performance. Bathini also highlighted the 25,000 mark on the Nifty as a key level to watch, noting that holding above it could support a short-term rebound, while a breakdown may trigger further weakness.
Commodities shine amid uncertainty
While equities struggled, commodities stole the spotlight. Silver futures surged nearly 6% to scale a record high of Rs 3,54,780 per kg, while gold futures climbed over 1.7% to touch an all-time high of Rs 1,59,820 per 10 grams in the domestic market.
Silver has already posted gains of more than 50% this year, making it one of the strongest-performing assets. Gold, too, remained firm as investors sought safety amid global economic and geopolitical uncertainty. In overseas markets, gold extended its rally after breaching the $5,100 mark in the previous session, with silver prices hovering near historic highs.
Caution prevails despite positive cues
Although the India-EU trade agreement is expected to deliver long-term benefits, Tuesday’s market action underlined that near-term concerns are dominating investor decisions. Fears around tariff reductions impacting domestic industries, continued foreign fund outflows and key technical levels are shaping market behaviour.
With more details of the trade deal awaited and global cues still mixed, volatility is likely to persist through the session. For now, optimism around trade progress has taken a back seat as caution continues to rule Dalal Street.
