The country's benchmark indexes fell on Tuesday, January 2, dragged by financials, auto and information technology stocks, as selling pressure emerged at near record high levels.

The blue-chip NSE Nifty 50 fell 0.35 per cent to 21,665.80 points, while the S&P BSE Sensex shed 0.53 per cent to 71,892.48.

Anita Gandhi, Founder and Head of institution at Arihant Capital, said, "We expect selling pressure at near record high levels to continue ahead of the earnings season next week."

While the undertone remains positive, the markets will need proof of earnings to justify the rich valuations and sustain the ongoing rally, Gandhi added.

The Nifty gained about 20 per cent in 2023, with more than half of it in the final two months, aided by faster-than-expected quarterly growth, elevated bets on US rate cuts in the first half of 2024, and steady retail participation.

On the day, IT stocks lost 1.16 per cent, while financials shed 0.52 per cent. The two sub-indexes, which account for 49 per cent of the Nifty, had gained about 16 per cent and 12 per cent, respectively, in the final two months of 2023.

Auto stocks dropped 1.37 per cent. Eicher Motors extended decline, losing 3.61 per cent, as a tax penalty notice and a fall in December motorcycle sales continued to weigh. Mahindra and Mahindra lost 2.77 per cent, after the company attributed the decline in tractor dispatches in December to the tapering of agricultural activities in the month and flagged supply challenges.

On the flip side, the pharma index rose 2.46 per cent, hitting a new record high. Drug maker Lupin jumped 6.21 per cent after Nomura raised its price target to a Street high. Adani Ports and Special Economic Zone gained 2.92 per cent after the company raised its fiscal 2024 cargo volume forecast. Coal India added 2.84 per cent after reporting an 8.2 per cent year-on-year increase in coal production in December.

“Profit taking in banking, IT, auto and realty stocks took a toll on the markets, as expensive valuations prompted investors to pare their holdings. Besides, the ongoing conflict in the Red Sea has been making investors jittery, as any flare-up in violence could trigger an upsurge in oil prices and weigh on the economy," said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd. 

Tapse said that if the last two days' trading action on Dalal Street is any indication then volatility could be seen going ahead. "From a technical perspective, Nifty’s aggressive upside targets are at 22000 mark, while the line in the sand is at Nifty’s make-or-break support at 21,487 mark," Tapse added.

BSE Top Gainers

• Sun Pharma: 2.85 per cent
• Bajaj Finance: 1.76 per cent
• Bharti Airtel: 1.06 per cent
• Reliance: 0.79 per cent
• Bajaj Finserv: 0.70 per cent
• Titan: 0.64 per cent

BSE Top Losers

• M&M: -2.78 per cent
• Kotak Bank: -2.56 per cent
• UltraTechCement: -2.46 per cent
• L&T: -2.36 per cent
• ICICI Bank: -1.91 per cent
• IndusIndBank: -1.88 per cent

NSE Top Gainers

• Divis Labs: 3.09 per cent
• Adani Ports: 2.97 per cent
• Sun Pharma: 2.77 per cent
• Coal India: 2.61 per cent
• Cipla: 2.55 per cent
• Dr Reddy: 1.90 per cent

NSE Top Losers

• Eicher Motors: -3.57 per cent
• M&M: -2.48 per cent
• UltraTechCement: -2.47 per cent
• L&T: -2.40 per cent
• LTIM: -1.81 per cent
• IndusInd Bank: -1.74 per cent