The headline equity benchmarks closed sharply lower on Tuesday, weighed down by profit-booking and a spike in U.S. Treasury yields and crude oil prices that dampened investor sentiment. The pullback was further exacerbated by weakness in major heavyweight stocks, which heavily impacted the indices. Despite headlines around easing U.S.-China trade tensions, the news failed to lift the market. In fact, the easing of tensions sparked concerns about India’s competitiveness in manufacturing, potentially diminishing the “China-plus-one” trade narrative. The Nifty ended the session below the 24,600 level, underscoring the cautious mood among investors.
In the barometer index, the S&P BSE Sensex, tanked 1,281.68 points or 1.55% to 81,148.22. The Nifty 50 index slumped 346.35 points or 1.39% to 24,578.35.
The broader market outperformed the frontline indices. The S&P BSE Mid-Cap index rose 0.17% and the S&P BSE Small-Cap index gained 0.99%. The market breadth was strong.
The NSE's India VIX, a gauge of the market's expectation of volatility over the near term, fell 1.04% to 18.20.
Among the sectoral indices, the Nifty Media index (up 1.66%), the Nifty PSU Bank index (up 1.56%) and the Nifty Pharma index (up 1.22%) outperformed the Nifty 50 index.
Meanwhile, the Nifty IT index (down 2.42%), the Nifty FMCG Index (down 1.34%) and the Nifty Auto index (down 1%) underperformed the Nifty 50 index.
Economy:
India's retail inflation in April fell to 3.16% from 3.34% in March, showed official data released by the Ministry of Statistics and Programme Implementation on Tuesday. Effectively, headline inflation declined 18 basis points in April 2025 compared to March 2025. According to the government, it is the lowest year-on-year inflation since July 2019. The decline in headline inflation in April 2025 is mainly attributed to decline in inflation of vegetables, pulses & products, fruits, meat and fish, personal care and effects and cereals and products.
Numbers to Track:
The yield on India's 10-year benchmark federal paper rose 0.35% to 6.392, compared with the previous close of 6.370.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 85.3000, compared with its close of 85.3600 during the previous trading session.
MCX Gold futures for the 5 June 2025 settlement gained 1.25% to Rs 94,061.
The US Dollar Index (DXY), which tracks the greenback's value against a basket of currencies, was down 0.19% to 101.40.
The United States 10-year bond yield shed 0.13% to 4.451.
In the commodities market, Brent crude for June 2025 settlement gained 35 cents or 0.54% to $65.31 a barrel.
Global Markets:
European markets advanced on Tuesday as investors awaited earnings from Tata Motors, Nissan, Honda, Metro Bank, and Bayer. Key data releases include U.K. retail sales and Germany’s ZEW economic sentiment survey.
The U.K. unemployment rate hit 4.5% in the January to March period, hitting the highest rate since August 2021. Vacancies dropped by 42,000 across February to April, falling for the 34th consecutive quarter.
Asian stocks ended higher, following a massive rally on Wall Street after the U.S. and China agreed to a trade deal, which includes a 90-day pause on new tariffs and a reduction in reciprocal tariffs by 115 percentage points.
In the U.S., major indices posted significant gains. The Dow Jones Industrial Average rose 2.81%, the S&P 500 advanced 3.26%, and the Nasdaq Composite gained 4.35%, with technology stocks — particularly those with exposure to China, such as Apple and Tesla — leading the way.
The surge in investor confidence followed a joint announcement on Monday that the U.S. and China had agreed to mutually reduce tariffs on each other’s goods for an initial 90-day period. Under the agreement, the U.S. will reduce its tariffs on Chinese imports from 145% to 30%, while China will lower its retaliatory tariffs from 125% to 10%. China also committed to easing certain non-tariff measures, including restrictions on rare earth exports.
The agreement was the result of intensive negotiations held over the weekend in Geneva, where both sides reported "substantial progress." A joint statement emphasized the importance of developing "a sustainable, long-term, and mutually beneficial economic and trade relationship."
This development marks a significant de-escalation in the prolonged trade conflict that began with the imposition of sweeping tariffs by the United States. The trade tensions had previously disrupted global supply chains, heightened market volatility, and raised concerns over a potential global recession.
However, despite the positive momentum, investor focus is now shifting toward upcoming U.S. inflation data, with the Consumer Price Index (CPI) report due later Tuesday.