Stocks Hit Eight-Month Low, Short-Term Yields Fall

Highlights 

• Citi upgrades India to 'overweight', sees Nifty hitting 26,000 by December
• NTPC Green Energy shares fall over 6% as shareholder lock-in ends
• Glenmark Pharma shares rise nearly 2% on settlement of some lawsuits
• Manappuram Finance gains 2% on report of Bain Capital nearing a deal to acquire controlling stake
• India among top countries at risk of higher US tariffs: S&P
• Adani Group plans to invest ₹1.1 trillion in Madhya Pradesh

The benchmark indices, Sensex and Nifty, slipped to an eight-month low today as mounting concerns over softening consumer demand and the looming threat of fresh US tariffs rattled sentiment. The BSE Sensex declined 856 points, or 1.14%, to 74,454, while the NSE Nifty lost 242 points, or 1.06%, to settle at 22,553.

Index heavyweight information technology and metal stocks were the worst hit because of concerns over slowing growth in the US. 

US consumer sentiment hit a 15-month low in February, with inflation expectations surging due to President Donald Trump’s proposed trade policies. 

India VIX—often called the "fear gauge"—eased to 14.44 from 14.53 in the previous session.

Sectoral Performance
Most sectoral indices ended in the red. Nifty Auto and Nifty FMCG were the only gainers among the 13 sectoral indices.

The Nifty Metal index faced selling pressure, slipping over 2% due to weak global sentiment that weighed on Vedanta, Tata Steel, and Hindalco.

The Nifty Auto index staged a sharp recovery, bouncing back over 1% from its intraday low to close 0.2% higher. 

 

The benchmark 10-year yield ended steady, while yields on shorter-duration bonds declined as the Reserve Bank of India's longer-term liquidity infusion plan and dovish commentary from minutes of the February MPC meeting aided sentiment.

On Friday, the RBI announced long-term dollar/rupee buy/sell swap auction of $10 billion for a tenor of three years to inject rupee liquidity for longer duration. Over the last five weeks, the central bank has bought bonds worth ₹1 trillion via auctions, and another ₹388.15 billion through secondary market screen-based purchases.  It has also conducted dollar/rupee buy/sell swaps worth ₹440 billion and injected ₹1.25 trillion via long-term repos, as well as provided funds through daily overnight repos. 

The liquidity infusion through the upcoming swap auction will reduce the likelihood of open market purchases of government bonds in the next couple of weeks, thereby not significantly boosting the demand for longer-tenure bonds.

 

The Indian rupee erased early session gains and ended little changed today amid a steep fall in the domestic equity markets and a rise in Brent crude prices. 

President selling of Indian shares and buying of dollars weighed on the domestic currency. The rupee remains supported around 86.75/$1 level as RBI possibly protected it or may be traders were wary of going long at above that. 

The dollar index also regained some composure after falling to 106.13. It closed the session at 106.63 giving the dollar some reprieve against the rupee.

 

Outlook
With Foreign Institutional Investors (FIIs) showing no signs of slowing their exit from Indian markets and the Nifty 50 closing below the crucial support level of 22,600 today, the possibility of further correction looms large. 

Experts suggest any rebound is unlikely to hold, given the persistent sell-on-rally strategy. In the short term, the next key support level for Nifty 50 stands at 22,400, aligning with the 20-month Exponential Moving Average (EMA).

Foreign investors have offloaded $3.12 billion worth of Indian equities so far in February.

On Tuesday, the rupee is expected to trade within the 86.45-86.80 range as month-end dollar demand picks up.   

This week, key market drivers include Nvidia's earnings, GDP data from both the US and India, and US personal consumption expenditures.

Events, Data on Tuesday

• Sixteen states to raise ₹380.54 billion via bond auction.
• US API Weekly Statistical Bulletin.
• Germany Feb GFK consumer climate survey
• US Jan New Residential Sales Data
• UK NIESR Dow Lecture with Bank of England Monetary Policy Committee Member Dhingra Speaks
• US Federal Reserve Bank of Richmond President Barkin Speaks.