Equity markets ended in the red on Wednesday, despite the Reserve Bank of India (RBI) announcing its first rate cut since May 2020. The BSE Sensex dropped 197.97 points to close at 77,860.19, while the Nifty 50 fell 43.40 points to end at 23,559.95. Throughout the week, the BSE market capitalisation fluctuated, starting at ₹42,480,380.82 crore on February 1, hitting a low at ₹42,031,299.60 crore on February 3, peaking at ₹42,803,611.66 crore on February 5, and settling at ₹42,580,986.85 crore on February 6. The market cap of the top 10 companies also varied, ending at ₹9,470,356.08 crore on February 6.
The RBI reduced the repo rate by 25 basis points to 6.25 per cent while maintaining a neutral stance. The central bank also revised its GDP growth forecast for FY25 downwards to 6.4 per cent and projected 6.7 per cent growth for FY26.
Vinod Nair, Head of Research at Geojit Financial Services, noted that while the rate cut was positive for the economy, investors were disappointed by the lack of anticipated liquidity measures, leading to profit-booking in the markets. The market breadth was negative, with more stocks declining than advancing.
Sector-wise, the Nifty Metal index gained 2.6 per cent, with top gainers including Tata Steel, ITC Hotels, Bharti Airtel, JSW Steel, and Trent. On the other hand, major losers included ITC, SBI, Britannia, Adani Ports, and TCS. FII selling continued to be a significant concern for the market, with FIIs offloading stocks worth ₹723 billion in January 2025.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, attributed the market decline to investors’ muted reaction to the rate cut. Technical analysts remained cautiously optimistic about the market’s near-term prospects, with Rupak De, Senior Technical Analyst at LKP Securities, highlighting a positive short-term trend despite volatility.
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. Ajit Mishra, SVP, Research at Religare Broking Ltd, emphasized the need for the Nifty to sustain above its crucial short-term support for a potential rebound.
Overall, the market sentiment remained cautious, with investors closely monitoring global trade tensions and FII outflows. The Indian rupee traded above 87.42 against the US dollar, with stability dependent on FII flows and global market sentiment. Technical analysts advised a buy on dips approach for Nifty and highlighted the positive weekly structure amidst short-term volatility. The market closed with the India VIX dropping by 3.45 per cent, indicating decreased market volatility.
