Sensex, Nifty end lower for third session; RBI rate cut fails to lift market mood

The broader markets were mixed, with the BSE Midcap index flat while the BSE Smallcap index slipped 0.7 percent.

The Sensex and Nifty ended lower on February 7 after having oscillated between gains and losses the entire session following the Reserve Bank of India’s (RBI) long-awaited 25-basis-point rate cut—the first in nearly five years—aimed at countering slowing economic momentum. The Monetary Policy Committee lowered the repo rate to 6.25 percent as expected, yet volatility persisted. Financials, FMCG, and IT stocks dragged the Nifty lower, while telecom, metals, and autos gained ground.

At close, the Sensex was down 197 points or 0.3 percent at 77,860, and the Nifty was down 43 points or 0.2 percent at 23,559. About 1,468 shares advanced, 2,293 shares declined, and 139 shares remained unchanged.

"The rate cut is a good decision, but FIIs are back to selling. Market participants know there's limited potential for a sustained rally, so shorting happens at higher levels," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. Foreign institutional investors (FIIs) have already offloaded Rs 9,709 crore worth of Indian shares in February.

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The banking sector struggled as the RBI’s monetary policy lacked additional liquidity-easing measures. ICICI Bank and SBI led the decline, dragging the Nifty Bank index down 0.5 percent.

"Banking will rebound only when FIIs turn buyers, which will take time. As long as FIIs keep selling, banking stocks will remain under pressure. Autos, on the other hand, are strong because the budget has boosted discretionary consumption," said Vijayakumar. "Realty should do well after the rate cut, but we aren’t seeing a sharp reaction yet. Market response will take time—the bigger concern remains FIIs."

Rajani Sinha, Chief Economist at CareEdge Ratings, said the RBI’s neutral stance allows flexibility to adjust policy amid evolving macroeconomic uncertainties, particularly from the external sector. "We expect the RBI to continue upholding favourable money market conditions by elongating tenor and higher quantum of repo auctions, currency swaps, and OMO purchases. These liquidity measures should ensure a smoother transmission of rate cuts in the money market," she said.

Sinha said that the RBI will remain watchful of the global uncertainties and their impact on the Indian economy as well referring to to trade war brewing in the US. Sinha also pointed to mounting global trade tensions, with the US imposing fresh tariffs—25 percent on Canada and Mexico and 10 percent on Chinese goods—citing concerns over illegal immigration and the drug trade. Though Washington softened its stance on Canada and Mexico with a 30-day reprieve, tariffs on China remain intact, prompting Beijing to take its dispute to the World Trade Organization.

"A global trade war could adversely affect India’s growth, inflation, and trade dynamics. However, there is still a lack of clarity on the extent of this impact," Sinha explained.

Back home, the broader markets were mixed, with the BSE Midcap index flat while the BSE Smallcap index slipped 0.7 percent. Among sectoral indices, only four out of the 13 major indices traded in positive territory.

The Nifty Metal index jumped 2.5 percent, fueled by optimism over increased infrastructure and real estate activity. A lower repo rate is expected to boost infrastructure and housing demand, both of which are heavily reliant on metals. This optimism sent metal stocks soaring, with JSW Steel, Tata Steel, Jindal Steel, and Welspun Corp climbing 3–7 percent.

Also Read | Banking stocks tumble as RBI's policy disappoints on liquidity measures

"For the real estate market, lower borrowing costs are expected to boost demand for home loans, making housing more affordable and stimulating sector growth," said Shishir Baijal, Chairman and Managing Director of Knight Frank India. "This is a positive development for both homebuyers and developers, potentially leading to increased sales and new project launches. We hope interest rate cuts will be passed on to consumers and the home loan rates become more attractive which combined with the earlier announced tax incentives spur residential demand across the different price brackets, but especially in the below Rs 50 lakh category, which has seen continued weakening of demand."

On the downside, ONGC, ITC, SBI, Adani Ports, and Britannia were among the biggest losers on the Nifty 50, falling 1–3 percent. Meanwhile, Tata Steel, Bharti Airtel, Trent, JSW Steel, and Hindalco led the gainers, rising 2–4 percent.

In individual stock moves, Bharti Airtel surged 4 percent after reporting a strong quarterly profit, driven by a one-time gain and tariff hikes. Conversely, Bikaji Foods tumbled 10 percent after its Q3 results revealed a steep 40 percent drop in net profit to Rs 27.77 crore. Sonata Software slumped 11 percent after missing margin expectations despite beating revenue estimates. Ola Electric's stock fell over 4 percent after reporting a net loss of Rs 564 crore in Q3, widening from Rs 376 crore in the same period last year.

From a technical standpoint, the 23,450–23,500 zone is expected to act as strong support for the Nifty 50. "As long as Nifty trades above this, there’s a good chance of an eventual breakout on the upside. Resistance is around 23,720–23,800," said a technical analyst at Indiacharts.

"There's a significant build-up of short positions, especially by FIIs, and when adjusted for changes in Nifty's lot size, the data suggests these are at record levels," he added.

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