India’s benchmark indices, Sensex and Nifty, lost early gains to trade flat on February 6, after opening higher, as optimism over a potential rate cut balanced concerns over escalating global trade tensions. IT and oil & gas stocks led the gains on Nifty 50, while auto and financial services lagged.
Investors are betting on the Reserve Bank of India to ease policy for the first time in nearly five years, with Governor Sanjay Malhotra's debut monetary policy review set to take centre stage. With the government already cutting personal tax rates in the Union Budget to spur consumption, the RBI’s next move could set the tone for growth.
At 9:40 AM, the Sensex was down 111 points or 0.1 percent at 78,159, and the Nifty was down 35 points or 0.2 percent at 23,660. About 1,623 shares advanced, 1,302 shares declined, and 141 shares were unchanged.
"Typically, when currencies depreciate, major economies resort to rate cuts. Most emerging market currencies are showing bearish trends. However, considering India's slowing growth and improved banking system liquidity, the market expects a 25-basis-point rate cut tomorrow (February 7). This would help revive growth and stimulate private capital expenditure," said Aishvarya Dadheech, Founder & CIO of Fident Asset Management.
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Dadheech believes the rate cycle is far from over. "Market participants anticipate another cut in April and possibly another in the second half of the year. This will be paacrticularly interesting given that the U.S. Federal Reserve is currently expected to implement only two rate cuts. India’s relatively comfortable inflation levels further support the possibility of additional rate reductions," he noted.
While the RBI’s policy decision dominates domestic sentiment, global markets remain tethered to the unpredictable moves of U.S. President Donald Trump. China has officially taken its trade dispute with the U.S. to the World Trade Organization (WTO), escalating tensions just as Washington tightens its grip on tariffs.
"Trump's tariff stance will likely remain unpredictable for the next few months. As a businessman, he understands the impact of trade wars—not just on other countries but also on the U.S. economy. Trade tensions can slow global growth and introduce unwanted inflation. However, he is using tariffs as a bargaining tool," said Dadheech. "His recent decision to extend a one-month reprieve for Canada and Mexico suggests that this back-and-forth rhetoric will continue."
Trump's latest tariff manoeuvring has only added to the volatility. 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. Two days later, he softened his stance, granting a 30-day reprieve to Canada and Mexico in exchange for stronger border security commitments. But for China, the trade war remains firmly in play.
The broader market also edged up, with the BSE Midcap gaining 0.1 percent and the BSE Smallcap rising 0.3 percent.
Despite the macro uncertainty, Dadheech sees selective opportunities in India's mid- and small-cap space. "While some investors are wary of mid- and small-cap stocks, I believe opportunities exist in fundamentally strong businesses where earnings visibility remains intact and valuations appear attractive," he said.
Geopolitical uncertainties, including the ongoing trade war, could sustain market turbulence for a few more months. However, Dadheech views this as a strategic moment for long-term investors to build a portfolio in the small-cap segment.
Also Read | Rupee touches fresh low of 87.51 against US dollar
Amongst sectors, IT stocks were in focus after US-based Cognizant Technology Solutions delivered strong Q4 results, surpassing revenue estimates but issuing a weaker-than-expected CY25 guidance. The Nasdaq-listed firm projected constant currency revenue growth of 3.5-6 percent for 2025. Despite this, Nifty IT gained 0.6 percent, driven by Infosys, TCS, and Persistent Systems.
Dr. Reddy’s, Power Grid, Cipla, BPCL, and Infosys led the gains on Nifty, rising between 1 percent and 1.5 percent. On the flip side, Shriram Finance, Titan, Tata Steel, ITC, and Apollo Hospitals were the top losers, slipping 1-3 percent.
Swiggy shares dropped 4 percent as brokerages delivered mixed views following a wider net loss of Rs 800 crore in Q3FY25, up from Rs 524 crore a year ago. Intensifying competition and aggressive dark store expansion are squeezing margins, with analysts anticipating continued pressure in the coming quarter.
The Q3 earnings season continues, with 10 major companies set to announce today. Key names to watch include ITC, State Bank of India, Trent, and MRF. Additionally, Bharti Airtel, Britannia Industries, Hero MotoCorp, Apollo Tyres, Aurobindo Pharma, and BEML will also report their Q3FY25 results today.
Overnight, U.S. stocks swung wildly before closing in the green, while benchmark Treasury yields slid as investors navigated disappointing earnings, mixed economic data, and lingering trade war jitters. Across the Asia-Pacific, markets tracked Wall Street’s rebound, inching higher in early trade.
Anand James, Chief Market Strategist at Geojit Financial Services, said the focus remains on 23,550, while the next targets of 24,020–24,226 may take longer to reach. He added that Nifty could see brief spikes to 23,860–23,909, but they are unlikely to hold.
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