Markets end lower as RBI’s rate cut fails to impress; FIIs continue selling spree 

Equity markets closed lower on Wednesday despite the Reserve Bank of India’s (RBI) first rate cut since May 2020, as investors remained concerned about global trade tensions and continued foreign institutional investor (FII) outflows.

The BSE Sensex fell 197.97 points or 0.25 per cent to close at 77,860.19, while the Nifty 50 declined 43.40 points or 0.18 per cent to end at 23,559.95. The BSE market capitalisation data for the week showed a fluctuating trend, starting at ₹42,480,380.82 crore on February 1 with 5,587 listed companies. After dropping to ₹42,031,299.60 crore on February 3, it peaked at ₹42,803,611.66 crore on February 5, before settling at ₹42,580,986.85 crore on February 6. The top 10 companies’ market capitalisation similarly varied, ending at ₹9,470,356.08 crore on February 6.

The central bank reduced the repo rate by 25 basis points to 6.25 per cent, while maintaining a neutral stance. The RBI also revised its FY25 GDP growth forecast downward to 6.4 per cent from 6.6 per cent and projected 6.7 per cent growth for FY26.

“A rate cut aimed at reviving the slowing economy is a positive indicator. However, yields edged higher as investors were disappointed by the absence of anticipated liquidity measures, leading to profit-booking in the indices,” said Vinod Nair, Head of Research at Geojit Financial Services.

The market breadth remained negative, with 2,402 stocks declining compared to 1,520 advances on the BSE. Sixty stocks hit their 52-week highs, while 101 touched their 52-week lows. Ten stocks hit the upper circuit, and four hit the lower circuit.

Among sectoral indices, metals showed strength with the Nifty Metal index gaining 2.6 per cent. Top gainers on the NSE included Tata Steel (+4.24 per cent), ITC Hotels (+3.73 per cent), Bharti Airtel (+3.60 per cent), JSW Steel (+3.35 per cent), and Trent (+3.09 per cent). The surge in Bharti Airtel came after the company reported a 460 per cent rise in Q3 net profit to Rs 16,135 crore, primarily due to a one-time exceptional gain.

Major losers included ITC (-2.49 per cent), SBI (-2.11 per cent), Britannia (-1.70 per cent), Adani Ports (-1.59 per cent), and TCS (-1.24 per cent). The Nifty PSU and FMCG indices declined by 1.3 per cent.

FII selling remained a significant concern for the market. According to JM Financial, FIIs offloaded stocks worth ₹723 billion ($8.4 billion) in January 2025, continuing their selling streak on 22 out of 23 trading days. Since October 2024, FIIs have sold stocks worth ₹1.7 trillion ($20 billion).

Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, attributed the market decline to investors’ muted reaction to the rate cut. “As the rate cut did not spring any major surprise, investors did not find anything interesting in the new RBI Governor’s comments, which resulted in a steady bout of profit-taking in banking, oil & gas, FMCG and power stocks,” he said.

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates Ltd, said while Nifty formed a red candle on the daily scale signifying weakness, its weekly structure remained strong. “Considering the strong weekly structure, buy on dips approach should be adopted in Nifty,” he suggested, adding that Bank Nifty’s immediate support lies near 49,650 while 50,600 will function as resistance.

Ameya Ranadive, Sr Technical Analyst at StoxBox, highlighted that while the rate cut aligned with market expectations, some investors were disappointed as they had anticipated a shift in stance from neutral to accommodative. “The market concluded on a negative note, with more stocks declining than advancing; specifically, 1,756 shares fell,” he observed.

The Indian rupee traded above 87.42 against the US dollar. “Despite the minor rupee bounce, further stability depends on FII flows and global market sentiment. The rupee range is expected to stay between 87.25-87.60,” noted Jateen Trivedi, VP Research Analyst at LKP Securities.

Technical analysts remained cautiously optimistic about the market’s near-term prospects. “The Nifty remained volatile as the RBI Governor announced the monetary policy. However, the volatility did not push the index below the 21 EMA on the daily timeframe, signifying a positive short-term trend,” said Rupak De, Senior Technical Analyst at LKP Securities.

The volatility index, India VIX, dropped by 3.45 per cent to 13.69, indicating decreased market volatility. The Nifty Bank index closed at 50,158.85, down 223.25 points or 0.44 per cent.

In the commodities market, gold traded positively with MCX gold gaining ₹200 to trade at ₹84,650. Market participants are now focusing on upcoming U.S. Non-Farm Payroll and Unemployment data for further cues.

“With major events now behind us, the focus will shift back to earnings for further cues,” said Ajit Mishra, SVP, Research at Religare Broking Ltd, adding that the Nifty needs to sustain above its crucial short-term support at the 20 DEMA for a potential rebound towards 23,900.