Sensex and Nifty ended slightly lower on February 12 after recovering most of the morning losses in a dramatic rebound. The benchmarks have been under pressure for six sessions now due to Donald Trump's latest tariff announcement, a sliding rupee, weak Q3 earnings, and persistent FII outflows.
The broader market underperformed the benchmarks with both the BSE Midcap index and BSE Smallcap index falling 0.5 percent. Earlier in the day, the broader markets entered bear market territory after falling 20 percent from their all-time highs. Markets will eye retail inflation data of US, scheduled for later on February 12, and India for further cues on trajectory of rate cuts by the central banks. India's January retail inflation eased to a five-month low of 4.31 percent.
At close, the Sensex was down 44 points at 76,249, while Nifty fell 12 points to 23,059. On the NSE, 1,034 shares advanced, while 1,556 declined. Sensex recovered nearly 800 points from day's low while Nifty gained over 200 points after hitting the low seen in January 27.
The recovery coincided with the AMFI data suggesting that equity fund inflows were strong in January despite the fall in stock markets.
Pointing to an unprecedented level of bearishness among Foreign Institutional Investors (FIIs), Rohit Srivastava, Market Strategist & Founder at Indiacharts said, "Foreign Institutional Investors (FIIs) currently hold the largest short position on record in terms of the number of contracts. This extreme bearishness suggests that any positive trigger could lead to a short-covering rally."
FIIs have pulled out Rs 17,129.5 crore from Indian equities so far in February.
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"This is also reflected in Nifty Futures' open interest, which has been rising as the market fell over the last 10-15 days, reaching a multi-year high. The excessive negativity in price action indicates that we could be at a bottom both in the short and medium term, with a recovery likely in the coming days or weeks, potentially moving back towards 24,000 or higher," Srivastava added.
Coming to sectoral indices, financials, construction, and metal stocks pulled the Nifty higher, while oil & gas, auto, and IT stocks declined.
Bajaj Finserv, SBI Life, Shriram Finance, HDFC Life, and Tata Steel were the top gainers on Nifty 50, rising 1-3 percent, while M&M, Eicher Motors, Power Grid, BEL, and IndusInd Bank were the biggest losers, falling 1-3 percent.
Bajaj Hindusthan's shares fell 4 percent after the company reported a net loss of Rs 102 crore in Q3, compared to a profit of Rs 20.3 crore a year ago, while revenue declined 15.2 percent to Rs 1,476 crore from Rs 1,741 crore year-on-year.
Ircon International shares fell nearly 6 percent after the company's net profit declined 64.6 percent to Rs 86.59 crore in Q3 FY25 from Rs 244.64 crore in Q3 FY24. Sales dropped 10.8 percent to Rs 2,612.86 crore from Rs 2,929.54 crore during the same period.
Gopal Snacks shares fell over 2 percent after its standalone net profit plunged 70 percent to Rs 5.3 crore in Q3, impacted by higher expenses. The company had posted a net profit of Rs 17.8 crore in the same quarter last year.
Jubilant Foodworks shares fell 4 percent after the company reported a 32.8 percent drop in net profit to Rs 41 crore compared to Rs 61 crore a year ago.
Patel Engineering shares rose over 3 percent after reporting a 17 percent rise in net profit to Rs 80.2 crore from Rs 68.5 crore a year ago, along with a 13.6 percent increase in revenue to Rs 1,205.5 crore compared to Rs 1,061 crore year-on-year.
On the technical front, Jigar Patel, Senior Manager of Equity Research at Anand Rathi Shares & Stock Brokers, believes Nifty is forming a bottom near 22,800. "On January 27, Nifty made a low around 22,800. Today, it has tested that level again, confirming it as support. Going forward, 22,800 will act as support, while resistance is expected around 23,450," Patel said.
All eyes are now on the upcoming CPI inflation data from both India and the U.S., as investors look for clues on the next market move. India's consumer inflation is expected to have dropped sharply to a five-month low of 4.6 percent in January due to slowing food price rises, according to a Reuters poll. Lower inflation could provide the Reserve Bank of India with room to address slowing economic growth, which has weighed on corporate earnings and consumption.
In the U.S., inflation numbers are expected to remain flat. "Only a significantly positive surprise would be very negative for the market. Otherwise, it’s likely to be a non-event, especially since the Fed has already indicated a wait-and-see approach before any rate cuts," Srivastava noted.
In a Senate Banking Committee hearing on February 11, U.S. Federal Reserve Chair Jerome Powell signalled no urgency to cut short-term interest rates, citing a "strong overall" economy with low unemployment and inflation still above the Fed's 2 percent target.
Ruchit Jain, Vice President, Motilal Oswal believes this stance is already factored into the market. "The Fed’s approach is clearly data-dependent, especially with ongoing uncertainties like tariffs that could drive inflation higher."
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