Nifty 50 drops nearly 1.5%, Sensex tumbles 1,000 pts at open: 5 key reasons why Indian stock market is falling

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Also Read: HDFC Bank share price cracks 7% after Q3 results; what should investors do? After a sharp rally in the markets with Nifty 50 scaling above 22,100 in the previous session, investors likely opted to take some profit out of the table, analysts said. Meanwhile, concerns over stretched valuations in the midcap and smallcap space also triggered selling. “Domestically, even though the economy is doing well and corporate earnings are good, all these positives are in the price and the valuations are elevated warranting a correction.

The mid and small cap space is highly overvalued and is sustaining at high levels only by the high liquidity in the system. Some profit booking and moving the money to fixed income can be considered now," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Weak global market cues also dragged domestic indices lower.

Asian markets traded in the red, while US stock market indices ended lower overnight as bond yields rose. US Treasury yields rose on Tuesday after central bankers in Europe and the United States pushed back against market expectations of imminent interest rate cuts. The yield on the benchmark US 10-year Treasury note increased by over 11 bps to 4.064%, weighing on risky assets.

“Market is likely to turn slightly weak in the near-term, getting impacted by some negative global and domestic cues. The global negativity will come from the rising bond yields in the US responding to concerns that the sharp rate cuts expected from the Fed this year may not materialise. Now indications are that the Fed is unlikely