India's equity benchmarks opened flat on February 5 as the Reserve Bank of India kicks off its three-day monetary policy meeting. Investors are on edge, anticipating a widely expected rate cut aimed at reviving growth. With global trade uncertainties casting a shadow, all eyes are on the RBI’s decision due February 7, where a 25-basis-point cut remains the market’s base case.
"Even if there's no immediate rate cut, the RBI is likely to signal a softer stance," said Sunil Subramanian, Market Veteran, in a conversation with Moneycontrol. "Inflation has moderated, and oil prices could stabilise with Trump reviving old oil wells. These factors create room for a rate cut, though it may come in the next quarter. If the RBI surprises with a cut now, rate-sensitive stocks could rally," he added.
At 9.28 AM, the Sensex was down 5 points or 0.01 percent at 78,578, and the Nifty was up 31 points or 0.1 percent at 23,770. About 2,135 shares advanced, 672 shares declined, and 110 shares were unchanged.
Meanwhile, after a long lull, foreign institutional investors (FIIs) returned as net buyers on February 4, purchasing Indian equities worth Rs 809 crore. This came on the back of a nearly 2 percent surge in benchmark indices after the U.S. paused planned tariffs on Canada and Mexico. However, FIIs remain net sellers for February, having offloaded Rs 4,476 crore worth of Indian shares so far.
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New Leadership, New Approach
Subramanian highlighted that new RBI Governor Sanjay Malhotra appears more aligned with the government's economic agenda. "Finance Minister Nirmala Sitharaman also recently met with the RBI, suggesting greater coordination between fiscal and monetary policies," he said recalling.
Trump's Tariff Tango
Globally, markets are closely tracking U.S. President Donald Trump’s shifting stance on tariffs. On February 1, he imposed 25 percent tariffs on Canada and Mexico, along with a 10 percent levy on Chinese goods, citing illegal immigration and the drug trade. Just two days later, he softened his approach, granting a 30-day reprieve for Canada and Mexico in exchange for stronger border security commitments. Tariffs on China, however, remain firmly in place.
"It seems like he's using tariffs as a bargaining tool to gain concessions. The market senses that he may not actually implement them," Subramaniam said. "While a full-fledged trade war seems unlikely, Trump is using this as leverage. If tariffs are enforced, U.S. inflation will rise, which could deter the Fed from cutting rates—something Trump actually wants to keep the U.S. competitive. It's a complex situation, but Trump, being a businessman, likely sees this as a strategic move to secure a better deal for the U.S. Markets are sensing a give-and-take approach rather than unilateral action," he explained.
Domestic Spotlight: Delhi Elections
Back home, the political stage is heating up as Delhi gears up for its high-stakes assembly elections. With 699 candidates contesting across 70 seats, the battle is shaping up to be a fierce one. Arvind Kejriwal's Aam Aadmi Party is eyeing a third consecutive term, facing a determined challenge from the BJP. In 2020, AAP dominated with 62 seats, following a landslide 67-seat victory in 2015.
Sectors, Stocks in Focus
Barring Nifty FMCG and Nifty Auto, which slipped 0.6 percent and 0.3 percent, all 11 major sectoral indices traded in the green. Gains in energy stocks, led by ONGC and oil marketing companies, offset losses in consumer stocks as optimism over earnings lifted sentiment. BPCL and HPCL jumped over 3 percent each after Goldman Sachs upgraded both to "buy" from "neutral," citing a stronger earnings outlook.
BPCL, ONGC, IndusInd Bank, Hindalco, and Tata Motors led the Nifty 50 gainers, rising 1-3 percent, while Asian Paints, Nestle, Titan, Tata Consumer, and Britannia were the top laggards, dropping 1-4 percent.
Meanwhile, Asian Paints tumbled over 4 percent after missing profit expectations for the September quarter.
The broader markets outperformed the benchmarks, with both BSE Midcap and BSE Smallcap climbing over a percent each.
Technical Take
Anand James, Chief Market Strategist at Geojit Financial Services said, "While we are content to have reached the target range that has been in play for over a week, the potential for even larger upside remains a fair possibility." He said that since Nifty closed above the upper Bollinger Band and is near the 50 SMA for the first time since January, a pullback seems likely before a breakout above 23,789. "If dips thereof are contained above 23,550, expect spikes to, but not exceeding 24,020 or 24,226," James added.
Global Markets
On Wall Street, major U.S. indexes closed higher on February 4, supported by energy stocks and optimism surrounding Trump's softened tariff stance.
Asia-Pacific markets were mixed today after Wall Street rose overnight, shrugging off Trump tariffs and China's retaliatory measures. China's CSI 300 Index initially opened higher post-Lunar New Year but reversed to drop 0.6 percent. Meanwhile, the country's Caixin Services PMI fell to 51.0 in January from 52.2 in December, signalling a slowdown in services activity.
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