Indian stock markets opened on a weak note on Tuesday, even as India and the European Union moved closer to announcing a long-awaited trade agreement later in the day. Dalal Street resumed trading after the Republic Day holiday, but instead of seeing a strong rally on positive global news, indices extended their recent cautious trend.
In early trade, the Sensex dropped more than 400 points, while the Nifty fell close to 100 points. However, both benchmark indices later recovered a portion of their losses and were trading in the green by around 9:40 in the morning. Despite the rebound, overall market sentiment remained guarded, with investors showing little willingness to take aggressive positions.
The early decline came even as reports suggested that India and the European Union had concluded negotiations on a major trade deal that has been under discussion for several years.
The agreement, which is expected to be formally announced later in the day, has been described by leaders on both sides as historic. It comes at a time when global trade relationships are under pressure due to geopolitical tensions and shifting economic alliances.
However, the positive news around the trade deal was overshadowed by concerns about its possible impact on certain domestic sectors, especially automobiles. Auto stocks came under heavy selling pressure after reports indicated that India may reduce import duties on European cars as part of the agreement.
According to a Reuters report, India is likely to cut tariffs on European car imports to around 40 percent. If implemented, this would represent one of the most significant openings of India’s automobile market in decades. Investors reacted negatively, worried that lower tariffs could increase competition for domestic car manufacturers.
Mahindra and Mahindra was among the biggest losers in early trade, with its shares falling around four percent. The stock dragged down the Nifty Auto index, which slipped as much as two percent during the morning session. Other automobile companies also traded lower, contributing to the weakness in the broader market.
Apart from sector-specific concerns, continued foreign investor selling also weighed on sentiment. Market experts said that steady outflows by foreign institutional investors have been a key reason for the recent pressure on Indian equities.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said foreign investors have sold shares worth nearly 40,000 crore rupees in January alone. He noted that as long as this selling trend continues, the market is likely to remain under stress.
According to him, the Nifty level of 25,000 is a crucial support point. If the index manages to hold above this level, a short-term recovery could take place. However, if it slips below, further weakness may follow.
While equities struggled, commodity markets saw strong action. Silver futures surged six percent to hit a record high of 354,780 rupees per kilogram. Gold futures in India also climbed more than 1.7 percent to touch an all-time high of 159,820 rupees per 10 grams.
Silver has already gained more than 50 percent this year, making it one of the best-performing assets. Gold prices remained firm as investors continued to move towards safe-haven investments amid global uncertainty.
In international markets, gold crossed the 5,100 dollar mark for the first time in the previous session. Ongoing geopolitical tensions and concerns about global economic growth have kept demand for safe assets strong. Silver prices overseas also remained close to record levels.
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Despite the long-term positive potential of the India-EU trade agreement, Tuesday’s market action showed that short-term worries are still dominating investor behaviour. Concerns about tariff cuts, continued foreign selling, and key technical levels are shaping the mood on Dalal Street.
Analysts expect markets to remain volatile through the day as investors digest details of the trade deal and monitor global cues. For now, caution continues to define market sentiment.
