Opening Bell: Nifty near 16,500, Sensex drops 400 points; auto, energy stocks gain

Tracking negative Asian markets, the domestic equity benchmarks started lower amid volatility and profit booking on Monday. The broader Nifty50 and the Sensex opened lower by more than half per cent. The former opened near 16,600 and the latter shed around 400m points to start around 55,600. The headline indices opened at 16,578.45 and 55,622.01 respectively.  

In the broader market, Nifty midcap opened marginally higher by 0.10%, while small cap index declined nearly 0.3% in the opening trade.  

Sectorally, auto, realty and oil & gas gained marginally, while all other sectoral indices slipped in the red.

"The pullback in the market has been sharply assisted by smart bounce in large-caps across sectors. The recovery in beaten down IT stood out. A significant development in the market is the selling exhaustion  by FPIs of recent days turning into FPI buying of Rs 502 crores. It remains to be seen whether this trend will sustain," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services on Tuesday's correction. 

He said the dominant factor determining the market direction, going forward, would be the trend in the US market, which, in turn, would be determined by the inflation in the US and the Fed's response to it. "The recent rally has been supported by expectations that inflation is peaking out and, therefore, the Fed wouldn't have to hike rates as aggressively as the market feared," said VIjaykumar

A major headwind for the Indian economy and markets is crude spiking above $120 on EU sanctions on Russian oil, the expert said

"Financials can remain resilient even in a choppy market," he added 

In the pre-opening, the Sensex shed nearly 300 points as 13 stocks advanced and 17 declined on the 30-share index on Tuesday.  

Earlier, all major Asian indices dropped in the morning trade. Hinting at a negative opening for the domestic equity market, SGX Nifty Futures declined nearly 70 points on the Singaporean Exchange in early trade on Monday.  

Meanwhile other major Asian indices such as Japanese Nikkei 225, Hang Seng Index at the Hong Kong Exchange and Chinese Shanghai composite marginally dropped by 0.10%, 0.05% and 0.20% respectively. 

The US market remained closed on Monday to commemorate Memorial Day.