Sensex, Nifty settle flat: Here's why markets saw mild gains despite landslide NDA victory in Bihar

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26 Aug, 2025 12:21

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The equity benchmark indices settled flat on Friday as weak global cues and foreign fund outflows kept investor sentiment subdued.

Analysts said the markets had largely priced in a NDA win in Bihar and were now looking for cues from the upcoming RBI Monetary Policy Committee meeting and Federal Reserve's FOMC meeting next month.

"...investors shifted focus to upcoming RBI MPC and US Fed FOMC meetings, adding to the wait-and-watch mood," Sudeep Shah, Head - Technical Research and Derivatives at SBI Securities, said.

The Sensex benchmark began the trade on a negative note by declining 449.35 points or 0.53 percent to 84,029.32. The Nifty started the day off lower by 138.35 points or 0.53 percent to 25,740.80.

However, both the benchmark indices showed some recovery at the fag end before closing the session with gains for the fourth day in a row.

The Sensex ended 84.11 points or 0.10 percent higher at 84,562.78, while the Nifty went up 30.90 points or 0.12 percent to settle at 25,910.05.

Infosys, Eicher Motors and Tata Steel were the major laggards in the Nifty50 pack, declining up to 3 percent, while Asian Paints and Jio Financial Services rose up to 1 percent.

1) Volatility ahead of final Bihar poll results: Volatility spiked as investors tracked the outcome of the Bihar polls, which served as the day’s main trigger.

"The market will be focused on the Bihar election outcome today. But the reaction will be temporary, whatever the results might be," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. He said medium- to long-term trends would depend on earnings growth, supported by expectations of robust GDP expansion.

InCred Research said an NDA win is largely priced in, but a deviation from projections could prompt investors to price in a “coalition discount,” potentially triggering a 5-7 percent slide in benchmark indices Nifty and Sensex.

2) Weak global cues: Global sentiment remained weak after Wall Street ended sharply lower overnight. Nvidia and other technology majors led the decline as investors scaled back expectations of near-term interest rate cuts amid persistent inflation concerns. Major US indices posted their steepest daily drops in more than a month, with the Nasdaq falling 2.3 percent, the S&P 500 slipping 1.7 percent and the Dow Jones Industrial Average losing 1.7 percent.

"The weakness on Wall Street may also have reflected uncertainty around the release of key US economic indicators following the prolonged government shutdown," said Devarsh Vakil, Head of Prime Research, HDFC Securities. He noted that recent comments from Federal Reserve officials signalled hesitation about further rate cuts.

Asian markets joined the selloff, with major indices trading lower. South Korea’s Kospi fell 2.2 percent, Japan’s Nikkei dropped 1.7 percent, Hong Kong’s Hang Seng eased 1.4 percent and China’s SSE Composite slipped 0.16 percent.

3) Crude climbs: Brent crude rose 2.71 percent to USD 60.28 per barrel, supported by a decline in US inventories and supply restraint among non-OPEC+ producers. Higher crude prices tend to weigh on Indian markets as they increase import costs and raise concerns over inflation.

4) Foreign fund outflows: Foreign institutional investors remained net sellers for the fourth straight session, offloading equities worth Rs 383.68 crore on Thursday. Persistent FII selling  exerts pressure on domestic markets.

5) India VIX rises: The India VIX, the volatility gauge, moved up more than 1 percent to 12.30. A rise in VIX indicates higher expected near-term volatility, often prompting cautious positioning among traders.

Anand James, Chief Market Strategist at Geojit Financial Services, said Nifty turned lower after briefly moving above 25,980, confirming the caution highlighted earlier. He said the uptrend towards 26,130–26,550 remains intact as oscillators have yet to indicate a reversal, though the downside marker may shift higher to 25,789.