INDIA STOCKS-IT, auto shares drag Indian benchmarks lower ahead of federal budget

Updates for morning trade

By Bharath Rajeswaran

Jan 29 (Reuters) - India's stock benchmarks declined on Thursday, following two sessions of gains fueled by the trade deal with the European Union, as attention moved to the federal budget due on Sunday.

The budget is key for signals on the trajectory of economic growth momentum and corporate earnings in the world's fastest-growing major economy. Markets will operate in a special Sunday session.

The Nifty 50 .NSEI fell 0.61% to 25,183.75, while the BSE Sensex .BSESN shed 0.71% to 81,763.07, as of 10:08 a.m. IST. Indian stocks have had a subdued start to 2026, with the Nifty falling about 3.6%.

On the day, 11 of the 16 major sectors logged losses, with information technology shares .NIFTYIT dropping 1.6% to be the top sectoral decliners.

The drop comes after the U.S. Federal Reserve held rates as widely expected, citing still-elevated inflation and solid growth. Markets are not pricing in another Fed cut until the June meeting.

Higher U.S. rates make emerging markets like India less attractive for foreign investors as they support the dollar and U.S. Treasury yields.

FPIs have already offloaded Indian shares worth $4.56 billion in January so far, after a record $19 billion outflow in 2025.

"The Fed decision is likely to lead to short-term challenges in U.S. rate sensitive sectors. Globally this may lead to slight market decline as investors adjust to the expectation of no immediate rate cuts," said Rajesh Palviya, head of research at Axis Securities.

Auto index .NIFTYAUTO lost 1.4%, dragged by India's top carmaker Maruti Suzuki MRTI.NS, which dropped 3% on missing quarterly profit expectations on a one-time charge and higher costs.

The broader small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 fell 0.1% and 0.3%, respectively.

Bucking the trend, Larsen & Toubro LART.NS jumped 2.5% despite missing profit estimates as multiple brokerages reiterated their constructive view on long-term earnings growth.

Gland Pharma GLAD.NS gained 5.3% after posting a rise in quarterly profit.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Ronojoy Mazumdar and Mrigank Dhaniwala)

((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))