Indian shares reverse early gains as IT, auto drag

By Bharath Rajeswaran

Indian benchmark equities fell on Tuesday, dragged by information technology stocks on worries about rate hikes in the U.S. and auto shares on the Delhi government's new electric vehicle policy.

The Nifty 50 NSE:NIFTY fell 0.22% to 23,894.1 and the BSE Sensex BSE:SENSEX edged 0.16% lower at 76,607.97, as of 10:13 a.m. IST. They had opened about 0.4% higher.

Volatility is likely to stay elevated due to the monthly derivatives expiry, with investors' short-position rollovers in focus, analysts said. The Nifty India VIX NSE:INDIAVIX rose to 13.9 on Tuesday from 13.6 in the previous session.

Asian markets rose after Wall Street gained overnight on a tech rebound. .

Brent crude ICEEUR:BRN1! remained below $73 a barrel.

While oil prices have moderated, measures of inflation have jumped in the U.S., fuelling expectations that the Federal Reserve could raise rates later in 2026.

The IT index NSE:CNXIT fell 1.8% as rate hikes in the U.S. could weigh on client spending and economic growth in the country, a key market for the sector.

The auto index NSE:CNXAUTO fell 0.5% after the Delhi government announced a new EV policy. The capital plans to only register electric three-wheelers from January 1, 2027 and electric two-wheelers from April 1, 2028, forcing buyers to ​move away from internal combustion engine vehicles.

"In light of India's relative disadvantage in the battery supply chain, pushing EV is on a net basis negative for the Indian economy as well as the overall Indian automobile sector," said analysts led by Yogesh Aggarwal of HSBC.

Ten of the 16 major sectors declined. The broader small-caps NSE:CNXSMALLCAP rose 0.5% while mid-caps NSE:CNXMIDCAP were muted.

The Nifty and Sensex have gained 1.5% and 2.5% in June so far, aided by lower oil prices and measures to support the rupee and attract foreign flows.

"While the broader market structure remains constructive, momentum indicators are showing signs of moderation, suggesting markets may continue to consolidate in the near term," said Aakash Shah, technical research analyst at Choice Broking.