Sensex and Nifty fell at open on 30 May as election uncertainty prompted traders to book profits ahead of the results, overwhelming the positive news of the S&P upgrading India’s sovereign credit rating outlook. With the May month derivatives contracts set to expire today and election results due on June 4, volatility is expected to remain high, said market experts.

At about 9:40 am, the Nifty 50 had slipped more than 100 points or 0.5 percent to below 22,600, while the Sensex fell by over 300 points to below 74,200.

FMCG and IT stocks were the main drags on the Nifty 50. Metal stocks also suffered, with Tata Steel declining by 2.5 percent after the company reported a 64 percent year-on-year drop in net profit to Rs 611 crore, missing estimates.

In contrast, financial services gained, with Nifty Bank and Nifty PSU Bank each rising 1 percent. ICICI Bank, Axis Bank, and SBI were the top positive contributors to the Nifty 50.

India's VIX rose 0.5 percent to 24.3. The markets will continue to be volatile due to speculations about the number of seats that the NDA government will win, said Ambareesh Baliga, an independent market analyst. The general consensus is that the NDA will retain power, but whether they will achieve a clear majority remains uncertain, he said.

"If the NDA wins over 380 seats, the markets will rally. However, if they secure only 320-330 seats or fewer, a correction is expected," said Baliga. He advised traders to hold some cash due to election-related uncertainty. "We have seen a substantial rally, and valuations are high. Therefore, risks are elevated at this point."

Rating agency S&P on May 29 stated that it has revised the outlook for India to positive from stable on robust growth and rising quality of government spending. "On a standalone basis, this could have had a positive impact. But there is a fear among people about elections, which is leading them to book profits at this time."

According to market experts, global markets are not significantly impacting the domestic market, which is driven primarily by-election outcome expectations.

US indices fell overnight due to rising Treasury yields and uncertainty over potential Federal Reserve interest rate cuts. Asian indices mirrored this negative sentiment.

The 10-year US Treasury yield hit a four-week high of 4.6% following weak debt auctions. Persistent inflation and hawkish comments from central bankers have led traders to lower their rate cut expectations to just one by November or December, down from multiple cuts anticipated earlier this year, according to the CME FedWatch Tool.

"The global market downturn led to a gap down opening in Indian markets," said Deven Mehata, Research Analyst at Choice Broking. "On the downside, the Nifty 50 finds significant support at 22,500 levels. If Nifty 50 breaks 22,500, we might expect further declines on the monthly expiry," he added.