CHENNAI: The equity markets turned cautious following news of the death of Maharashtra Deputy Chief Minister Ajit Pawar, with investor sentiment dented by the sudden political shock. Benchmarks pared a part of their intraday gains as traders moved to reduce risk exposure, particularly in stocks perceived to have sensitivity to political and policy stability in the state. While the broader market did not witness panic selling, the mood shifted to defensive, with selective profit-taking seen in cyclical and infrastructure-linked stocks.
Market participants said the reaction reflected short-term uncertainty rather than a reassessment of long-term fundamentals, and attention will remain on how quickly political continuity is ensured in Maharashtra.
While, the trade remained largely positive footing during afternoon trade on Wednesday, extending the gains recorded in the morning session as investors continued to factor in the implications of the India–European Union free trade agreement and supportive global cues. The benchmark indices held firm through midday, reflecting sustained risk appetite, though trading activity suggested a degree of selectivity and caution beneath the surface.
The BSE Sensex and the Nifty 50 were both trading higher, maintaining their positions above key psychological levels. Early momentum, driven by optimism over the trade pact and expectations of improved export prospects, carried into the afternoon, helping the indices consolidate their advances. However, the pace of gains moderated as some investors chose to lock in profits after the recent run-up, leading to periods of sideways movement.
Market participants said the overall tone remained constructive, with buying interest visible in sectors that are perceived to benefit directly from stronger trade linkages with Europe and a stable domestic macro environment. Financial stocks continued to attract attention on expectations of sustained credit growth and improving asset quality, while select energy and industrial shares also saw steady accumulation. Export-oriented sectors such as pharmaceuticals, information technology and auto components were watched closely, as the trade agreement is seen as a potential long-term catalyst for these segments.
At the same time, the broader market showed mixed trends. Several mid-cap and small-cap stocks underperformed the benchmarks, indicating that investors were becoming more discerning and focusing on quality and earnings visibility rather than chasing momentum. Stock-specific developments and corporate news drove sharp moves in individual counters, contributing to uneven breadth.
Global cues provided a supportive backdrop, with major overseas markets trading on a stable note and the U.S. dollar showing signs of softness, which tends to encourage flows into emerging market assets. Domestically, investors are also positioning themselves ahead of upcoming corporate earnings announcements and key economic data, which are expected to offer further direction in the near term.
Analysts said the afternoon trade pattern suggested that while sentiment remains positive, markets may be entering a consolidation phase after recent gains. The ability of the benchmarks to hold higher levels is seen as encouraging, but sustaining the rally will likely depend on continued clarity on global monetary policy, foreign institutional investor flows and confirmation of earnings growth.
Overall, the Indian markets in afternoon trade reflected a balance between optimism over medium-term growth drivers and caution over near-term uncertainties, pointing to a scenario where incremental gains are possible, but with heightened volatility and selective stock picking.