Indian equity benchmarks, the BSE Sensex and NSE Nifty 50, ended Wednesday's trading session on June 3, 2026, in negative territory after a day marked by volatility. The Sensex closed down by 303.67 points, or 0.41%, at 74,346.17, while the Nifty 50 shed 77.95 points, or 0.33%, to settle at 23,405.60. The market's performance was largely influenced by a steep sell-off in the information technology (IT) sector and ongoing geopolitical uncertainties in the Middle East, which contributed to a cautious investor sentiment.
IT Sector Plunges Amid AI Disruption Fears
The technology sector bore the brunt of the day's losses, with the Nifty IT index plummeting by 5.57%. This sharp decline was attributed to profit-taking following a recent rally in IT stocks and growing concerns about the impact of artificial intelligence (AI) on traditional IT services business models. Major IT players such as Tata Consultancy Services (TCS), Tech Mahindra, HCL Technologies, Infosys, and Wipro were among the top decliners. TCS alone saw an 8.4% drop in its share price. Analysts noted that the market is beginning to re-evaluate the conventional labor-arbitrage, billable-hour model in light of AI's potential to automate parts of the delivery chain. This sector-specific weakness significantly weighed on the broader market sentiment throughout the session.
Geopolitical Tensions and Economic Headwinds Dampen Sentiment
Investor caution was also fueled by persistent geopolitical tensions in the Middle East. Reports indicated renewed hostilities, with the US military intercepting Iranian missile and drone attacks, and diplomatic efforts showing little progress. This instability directly impacted crude oil prices, with Brent futures trading near $97 per barrel, adding to inflationary pressures. As a significant oil importer, India faces risks of higher inflation, a weaker rupee, and pressure on corporate margins due to rising energy costs. The Indian rupee depreciated by 31 paise against the US dollar, closing at 95.67 on June 3. Furthermore, foreign institutional investors (FIIs) continued their selling spree, offloading equities worth approximately ₹8,362 crore on June 2, adding to the downward pressure on domestic equities. US Treasury yields also edged higher amid the geopolitical uncertainty, making fixed-income investments more attractive relative to equities.
Market Recovers from Lows Amid Banking Sector Support
Despite opening lower and experiencing significant intraday declines, both the Sensex and Nifty 50 managed to recover a substantial portion of their losses in the latter half of the trading session. This recovery was largely supported by value buying at lower levels and strength in banking, healthcare, and telecommunication stocks. The Nifty PSU Bank and Nifty Private Bank indices emerged as lead sectoral gainers, with the former rising 1.70% and the latter 0.70%. Banking stocks provided a cushion against the steep fall in IT shares, helping the benchmark indices to close well above their intraday lows. The Sensex ended the session 850 points off its day's low, and the Nifty 50 also closed significantly higher than its intraday low of 23,151. The India VIX, a measure of market volatility, saw an increase, reflecting the ongoing uncertainty.
Looking ahead, market participants will be closely monitoring the Reserve Bank of India's (RBI) Monetary Policy Committee meeting, scheduled for June 3-5, for any indications on interest rates and inflation outlook. Global trade developments and commodity price movements will also continue to be key factors influencing near-term market sentiment. Investors will be watching for a decisive move above resistance levels for the Sensex around 74,800–75,000 and for the Nifty near 23,700–23,750 to signal a potential improvement in market sentiment. Conversely, sustained trading below these levels could keep the markets range-bound. The performance of the IT sector in the coming sessions will also be a critical indicator, particularly whether the recent surge can be sustained amidst evolving AI trends.