SENSEX drops nearly 800 points, NIFTY tests 24,500; here are key factors dragging markets on Tuesday

The Indian equity benchmarks fell sharply lower on Tuesday, June 3, as rising geopolitical tensions, weak global cues and renewed talks of implementation of tariffs dented investors' sentiment towards equities. The SENSEX fell as much as 799 points and NIFTY50 index touched an intraday low of 24,502. As of 1:33 pm, the SENSEX pared some losses and was down 577 points at 80,794 and NIFTY50 index declined 153 points to 14,563.

Rising geopolitical tensions

Fears of escalating geopolitical tensions after a Ukrainian drone attack destroyed more than 40 Russian planes deep in Russia’s territory led to fresh round of selloff in equities. Repeated Ukrainian strikes on the Engels air base, the main base for Russian nuclear-capable strategic bombers near the Volga River city of Saratov, prompted Moscow to relocate the bombers to other bases farther from the conflict.

Meanwhile, tensions in West Asia also escalated after Palestinian health officials and witnesses say Israeli forces fired on people as they headed toward an aid distribution site on Tuesday, killing at least 27, in the third such incident in three days. The army said it fired “near a few individual suspects” who left the designated route, approached its forces and ignored warning shots, AP reported.

Tariff threat

Sentiment also took a knock after US President on Friday said that he’s doubling the tariff on steel imports to 50% to protect their industry, a dramatic increase that could further push up prices for a metal used to make housing, autos and other goods.

In a post on his Truth Social platform, he added that aluminium tariffs would also be doubled to 50%. He said both tariff hikes would go into effect Wednesday.

Weak global markets

Markets in Europe were trading with a negative bias reacting to latest round of geopolitical tensions. France's CAC40 index fell 0.45%, Germany's DAX declined 0.30% and United Kingdom's FTSE100 index dropped 0.27%.

US stock futures were also indicating at a weak opening for US markets as US 500 futures fell 0.54% and Dow Jones futures declined 0.56%.

FII outflows

Selling by foreign institutional investors (FIIs) also exerted downward pressure on benchmarks. The FIIs sold shares worth ₹2,589 crore on Monday. They sold index futures worth ₹15,515.21 crore, data from stock exchanges showed.

Heavyweights drag

ICICI Bank, Larsen & Toubro, Axis Bank, Infosys, Tata Consultancy Services, Reliance Industries, Kotak Mahindra Bank and Bajaj Finance were top drags in the SENSEX. They collectively wiped out over 400 points from the SENSEX, data from BSE showed.

Sectoral picture

Selling pressure was broad-based as all the major sector gauges compiled by the National Stock Exchange, barring the measure of realty stocks, were trading lower led by NIFTY Financial Services index's 0.72% fall. NIFTY Bank, FMCG, IT, PSU Bank, Private Bank and Consumer Durable indices also fell between 0.5%-1%.

Mid- and small-cap shares were outperforming their larger peers as NIFTY Midcap 100 index fell 0.31% while NIFTY Smallcap 100 index advanced 0.16%.

NIFTY50 gainers and losers

As many as 42 shares in the NIFTY50 index were trading lower. Adani Ports was top loser in the NIFTY50 index, the stock fell 2.45%. Coal India, Bajaj Finserv, Adani Enterprises, Power Grid and UltraTech Cement also fell between 1.4%-2%.

On the flipside, Shriram Finance, Grasim, Bajaj Auto, Mahindra & Mahindra and Hero MotoCorp were among the notable gainers.

The overall market breadth was negative as 2,161 shares were declining while 1,764 were advancing on the BSE.