Sensex and Nifty opened near the flatline on February 7, with investors on edge ahead of the Reserve Bank of India’s (RBI) monetary policy decision. With growth slowing and the government already cutting personal income tax to spur consumption, the central bank is widely expected to deliver its first rate cut since May 2020.
At 9.18 AM, the Sensex was down 71 points or 0.09 percent at 77,986, and the Nifty was down 13 points or 0.06 percent at 23,589. About 1,213 shares advanced, 1,120 shares declined, and 109 shares were unchanged.
The Nifty 50 has slid 4.4 percent since the last policy meeting in December, weighed down by sluggish corporate earnings and a cooling economy. Analysts expect the RBI to lower the repo rate by 25 basis points to 6.25 percent, marking a shift from its prolonged pause since 2022.
"The main reason why RBI will likely cut the key rate this time is the expectation of an easing of CPI to 4.5-4.7 percent in January 2025 from 5.2 percent in December 2024," said Ajay Garg, CEO, SMC Global Securities. "For FY25, the real GDP growth is estimated at 6.4 percent which is the lowest growth rate in the last four years. Also, the GDP is expected to grow between 6.3-6.8 percent in FY26. To accelerate the GDP growth, there is an anticipation that the RBI will take the rate-cut route."
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Garg said the increase in the tax rebate to Rs 12 lakh in the Union Budget, along with the RBI’s recent liquidity measures through OMO and VRR auctions, reflects India's commitment to boosting liquidity, reviving demand, and driving economic growth. "However, the falling rupee is a key trigger that could influence the RBI's decision as further cuts can put pressure on the Indian rupee and increase outflows from the country. Globally, the tariff tensions and the strengthening dollar index can also affect RBI's monetary policy outcome," he added.
The Indian rupee weakened to a record low on February 6, weighed down by foreign selling and uncertainty about the U.S.-China trade war. So far in February FIIs offloaded Indian shares worth Rs 9,709 crore.
The broader market underperformed the benchmarks with the BSE Midcap declined 0.4 percent, while the BSE Smallcap index dropped nearly 1 percent.
When it comes to sectoral indices, Nifty IT and Nifty Oil & Gas dragged the Nifty lower, with Nifty IT slipping 0.6 percent and Nifty Oil & Gas dropping nearly 1 percent.
Power Grid, ONGC, ITC, TCS, and SBI were the biggest laggards on the Nifty 50, slipping 1-3 percent, while Bharti Airtel, Britannia, Tata Steel, JSW Steel, and Hero MotoCorp led the gainers, rising 1-3 percent.
Bharti Airtel shares climbed nearly 4 percent after the telecom giant posted a higher quarterly profit, driven by a one-time gain and tariff hikes.
Meanwhile, corporate earnings from LIC, M&M, and others are set to provide fresh cues.
Wall Street ended mixed overnight, with the S&P 500 and Nasdaq edging higher while the Dow dipped, as investors parsed earnings and awaited a crucial U.S. jobs report. Asian markets traded flat.
With volatility expected to spike ahead of the policy verdict, traders remain on guard.
"On the downside, 23,500 serves as a key support level, and a breach below this mark could trigger extended selling toward 23,200," said Hardik Matalia, Derivative Analyst at Choice Broking.
"On the upside, immediate resistance is observed at 23,700, followed by a critical hurdle near 23,800. A sustained close above these resistance levels is essential to negate the prevailing bearish sentiment and confirm a bullish reversal. If the index breaks above 23,800, it could further move higher toward the 24,000–24,200 levels. Buying on dips is advised near the support zones as long as the Nifty index holds above 23,200."
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