Despite a 25 basis point rate drop by the Reserve Bank of India, the Indian stock market, including the Sensex and Nifty 50, ended the day on February 7 down, marking the third straight session of losses.
The Indian stock market benchmarks, the Sensex and the Nifty 50, ended Friday, February 7, with losses, prolonging losses for the third straight day, shattering hopes of a recovery following a 25 basis point rate drop.On Friday, the Reserve Bank of India (RBI) announced a rate decrease of 25 basis points. Rate reductions typically boost market confidence, but the RBI's policy decision didn't.
The Nifty 50 ended 0.18 percent lower at 23,559.95, while the Sensex closed at 77,860, down 198 points, or 0.25 percent.
The major drags on the Sensex and the Nifty 50 were Infosys, HDFC Bank, SBI, TCS, ICICI Bank, ITC, and Reliance Industries.
In line with this, the BSE Smallcap index ended the day 0.68 percent lower. But with a 0.13 percent rise, the BSE Midcap index beat the Sensex.
Investors lost over ₹1 lakh crore in a single day as the total market capitalization of BSE-listed companies fell to almost ₹424 lakh crore from nearly ₹425 lakh crore the previous session.
Today's sectoral indexes
The Financial Services index shed 0.51%, and the Nifty Bank index fell 0.44%. The FMCG and PSU Bank indices saw losses of 1.30 and 1.38 percent, respectively.
Conversely, the Nifty Metal index experienced a 2.66 percent increase.
What caused today's decline in the Indian stock market?
A 25 basis point rate drop was already discounted by the Indian stock market, hence it did not stimulate the market. Furthermore, Sanjay Malhotra, the governor of the RBI, provided no explanation regarding the present cycle of rate reductions. The market appears to have been let down by this.
"The RBI Governor increased market anxiety by providing no guarantee of additional rate decreases. Prashanth Tapse, Senior VP of Research at Mehta Equities, pointed out that the 25 basis point rate drop was already factored in and did not increase market confidence.
Investors are also wary of placing bets on riskier stocks due to worries about a slowdown in the Indian economy.
The RBI's growth prediction was slightly revised downward, which also seems to have affected market sentiment.
Feelings are still being affected by Indian corporations' poor quarterly results.
"Weak corporate earnings are dampening market sentiment, with major companies reporting results below expectations," Tapse stated.
The main cause of the local market's collapse has been identified by foreign institutional investors' (FIIs') relentless dumping of Indian stocks. Since October of last year, FIIs have been selling down Indian stocks due to a number of factors, including a decline in the value of the Indian rupee, rising US bond yields, and uncertainty around rate reduction by the US Federal Reserve and President Donald Trump's protectionist policy.
Perhaps the main cause of the most recent market decline is the selloff by FIIs. They are still selling, and sentiment is further impacted by worries about US trade measures," Tapse added.
Technical outlook for the Nifty 50
The Nifty 50 stayed above the 21 EMA on the daily timeframe, indicating a positive short-term trend, despite the market's continued volatility, according to Rupak De, Senior Technical Analyst at LKP Securities.
"As long as the index remains over 23,450, the trend is probably going to continue to be favorable. The resistance is positioned around 23,700 on the higher end. A rally toward 24,050 might result from a clear move above 23,700, according to De.
Religare Broking's SVP of Research, Ajit Mishra, noted that now that the major events are over, attention will return to profits in search of additional clues.
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