The Indian stock market reversed its early gains in Tuesday's session to close lower as investors appeared to book profits at higher levels, causing the Nifty 50 and Sensex to shed 0.18% and 0.26%, respectively.

On the other hand, mid- and small-cap stocks continued to do well. The Nifty Midcap 100 and Nifty Smallcap 100 both gained 0.27% and 0.53% respectively. Markets opened higher, helped by Monday's strong close, but heavy selling in financial stocks during the last hour pulled the market down.

Among sectors, banking stocks were the worst hit, with the Nifty Private Bank index falling 0.64%. This was followed by autos and pharma, which fell 2.12% and 1.64%, respectively.

Investors are also keeping an eye on the upcoming GST Council meeting on September 3–4. Reports suggest that the council may cut taxes by at least 10 percentage points on about 175 items, including shampoos, hybrid cars, and consumer electronics.

Globally, the US dollar regained strength from a five-week low. The important US jobs data due this week, which could affect expectations about whether the Federal Reserve will cut interest rates.

Last week's US inflation report raised hopes for a rate cut, with markets now seeing a 90% chance of a 25-basis-point cut at the next Fed meeting. The US jobs report due later this week could influence how big that cut might be.

Meanwhile, US President Donald Trump said on Monday that India has offered to reduce its tariffs on US goods to "nothing," while US Treasury Secretary Scott Bessent stated that despite current tensions with New Delhi, Washington still maintains confidence in the long-term relationship.

Bessent added that the two countries will eventually resolve their differences but criticized India for buying Russian oil and reselling it, which he said was helping fund Russia's war in Ukraine.

12 Nifty stocks saw losses between 3% and 5%

Godfrey Phillips shares emerged as the top laggard as the stock continued to grind lower, losing another 5% to ₹10,059 apiece. Sarda Energy & Minerals, which made significant strides in August, has been seeing pressure in recent sessions, with the stock losing another 4.1% to ₹576 apiece.

Likewise, Five-Star Business shares extended their losing streak to the sixth consecutive trading session, sliding 4% to ₹529, their lowest level since May 2023. SBFC Finance also posted a sharp drop of 3.71% to ₹104.

Gujarat Narmada Valley Fertilizers & Chemicals closed with a 3.3% loss at ₹520 apiece, while Welspun Corp, Lemon Tree Hotels, Craftsman Automation, Indus Towers, Sundaram Finance, and Tube Investments of India all closed lower with losses of over 3%.

Sugar and tyre stocks led the gainers' list

All major sugar stocks gained sharply, with Shree Renuka rallying 12.7% to ₹32.4 apiece following the government's decision to eliminate all limits on ethanol production from sugarcane juice, sugar syrup, and molasses for the ethanol supply year 2025-26.

This policy change, announced on September 1, 2025, permits sugar mills and distilleries to manufacture ethanol without any quantitative restrictions, reversing the limitation imposed in the 2023-24 ethanol supply year due to reduced sugarcane availability.

Tyre stocks also closed higher, with MRF, JK Tyre & Industries, Ceat, and Apollo Tyres advancing up to 6.3%. The rally came amid hopes that the proposed goods and services tax (GST) reforms could extend to tyre companies, following a request from the Automotive Tyre Manufacturers Association (ATMA). The industry body has urged the government to reduce the GST rate on automotive tyres from the current 28% to 5%, emphasizing that tyres should not be classified as luxury goods given their significant cost impact on transportation, agriculture, mining, and construction.

Meanwhile, Sammaan Capital closed another session higher, rising 11% to ₹139 apiece, while Raymond Lifestyle, Alok Industries, and KEC International all gained over 5.5%. Railway-related stocks including Ircon International, Rail Vikas Nigam, and RailTel Corporation also advanced, closing with gains of 5.4%, 5%, and 3.8%, respectively.

Among metal counters, NMDC and NALCO surged 4.6% each, while Dabur India also ended in positive territory. Overall, 42 stocks closed the session with gains ranging between 3% and 12.7%.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.