Sensex Retreats 500 Points Amid Profit Booking and Global Uncertainty: What Investors Need to Know.

Sensex Retreats 500 Points Amid Profit Booking and Global Uncertainty: What Investors Need to Know! 

The Sensex fell sharply by 500 points from its day's high, and the Nifty slipped below 24,850 on September 4, 2025, despite early gains fueled by broad-based buying after GST regime reforms. The market initially rallied with the Sensex jumping nearly 889 points and the Nifty rising over 265 points in early trade; however, profit booking, mixed global cues, and continued selling by Foreign Institutional Investors (FIIs) caused the indices to decline later during the session.

Early Rally Driven by GST Reform

The key trigger for early market optimism was the GST Council's approval of a full overhaul that reduced tax rates on common consumer goods like roti, paratha, hair oil, ice creams, and TVs, while lowering taxes on personal health and life insurance to zero. This reform spurred buying in autos, FMCG, and consumer durables sectors. Notable Sensex gainers included Mahindra & Mahindra, which climbed over 7.5%, along with Bajaj Finance, Hindustan Unilever, Bajaj Finserv, ITC, Tata Motors, and UltraTech Cement . 

Profit Booking and Market Correction

The initial enthusiasm was tempered by profit booking activities that pushed the broader markets into the red after a strong green start. Experts noted that while the GST reform offers potential consumption growth benefits and could raise India's GDP growth to 6.5%-7% in FY26 and FY27, tariff issues remain a concern. Analysts also mentioned that the positive impacts of tax cuts had been largely priced in since the announcements on August 15. The market technicals showed the Nifty forming a double-bottom pattern and a possible rally if it breaks resistance at 24,770 

Mixed Global Cues Weigh on Sentiment

Global factors also contributed to the decline. While South Korea’s Kospi and Japan’s Nikkei were positive, significant selloffs in Chinese stocks and losses in Hong Kong’s Hang Seng and Shanghai’s SSE Composite indices dragged the broader Asia-Pacific market down. Concerns about ongoing tariff issues, bond market selloffs, and upcoming U.S. non-farm payrolls data kept investor sentiment cautious. The probability of a Federal Reserve rate cut later in September remains high, supported by weak U.S. job openings data, but mixed economic signals keep markets unsettled 

Continued Selling by Foreign Institutional Investors

FIIs sold equities worth Rs 1,666.46 crore on September 3, while Domestic Institutional Investors (DIIs) bought Rs 2,495.33 crore worth. Despite strong DII buying nearing last year’s record, FIIs have pulled out over Rs 1.3 lakh crore from Indian markets so far in 2025 amid shifts towards China’s equities and concerns over tariffs and weaker corporate profits. This marks a nearing record outflow trend last seen in 2022. The high DII ownership now surpasses foreign institutional stakes, reflecting the changing investment dynamics in India 

In summary, despite a promising start to the day driven by GST reforms and consumer sector optimism, profit booking, volatile global markets, and persistent FII outflows caused the Sensex and Nifty to retreat, highlighting the complex interplay of domestic reforms and global uncertainties in influencing market movements.

This detailed analysis provides investors with insights into the factors influencing current market trends and can guide informed decision-making amid fluctuations.