Sensex, Nifty erase early gains as oil & gas, financials drag; small-, mid-cap indices drop up to 2%

Early gains in the BSE Midcap and Smallcap indices fizzled out, slipping 1 percent and 1.7 percent, respectively.

India’s benchmark indices, Sensex and Nifty, had opened higher on March 3, attempting a rebound after logging their longest monthly losing streak since 1996. A surprise pickup in domestic growth provided some relief to investors, however, global trade uncertainties continued to weigh on sentiment and caused the indices to give up their early gains. Fresh data released on February 28 showed India’s economy grew 6.2 percent in the October-December quarter, driven by robust government and consumer spending.

At 9:50 AM, the Sensex was down 180 points, or 0.3 percent, to 73,015, while the Nifty fell 40 points, or 0.2 percent, to 22,084. On the NSE, 457 shares advanced while 1,405 shares declined. However, this rebound follows a steep sell-off in the previous session, where both indices plunged nearly 2 percent to nine-month lows. Mounting concerns over slowing domestic growth and aggressive U.S. tariffs have dragged the Nifty and Sensex down 16 percent and 15 percent, respectively, from their September peaks. Meanwhile, the broader small- and mid-cap indices have slipped over 20 percent from their record highs, officially entering bear market territory.

Relentless foreign selling has deepened the market downturn, with FIIs offloading Rs 58,988 crore worth of Indian equities in February. Domestic investors, however, have stepped in, purchasing stocks worth Rs 64,853 crore.

"Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of foreign portfolio investments (FPIs)," said Vipul Bhowar, Senior Director - Listed Investments, Waterfield Advisors. He noted that third-quarter earnings for FY25 have been lackluster, with forward earnings revisions struggling as downgrades outpace upgrades, particularly among companies outside the Nifty 50 index.

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"The recent market sell-off has been influenced by rising US bond yields, a strengthening US dollar, and global economic uncertainties, leading to a shift in investor focus towards US assets," he added.

Bhowar expects investors to remain on the sidelines until clearer signs of recovery emerge. "Until then, volatility in Indian markets is expected to continue due to ongoing global and domestic challenges."

Early gains in the BSE Midcap and Smallcap indices fizzled out, slipping 1 percent and 1.7 percent, respectively.

When it comes to sectoral performance, barring Nifty IT and Nifty Auto, the remaining 11 sectoral indices were trading in the red. Nifty IT led the gains, rising 0.6 percent, driven by strength in Infosys and Wipro. The auto index edged up 0.3 percent, supported by Mahindra & Mahindra and Eicher Motors, which climbed nearly 2 percent after reporting stronger-than-expected February sales.

On the flip side, Nifty Oil & Gas was the worst performer, slumping over 2 percent as heavyweight stocks RIL, ONGC, and Indian Oil dragged the index lower.

Among individual stocks, Axis Bank, ONGC, RIL, Coal India, and IndusInd Bank were the biggest laggards, falling 2-4 percent. Meanwhile, Grasim, Eicher Motors, M&M, Wipro, and UltraTech Cement led the gainers' list, rising close to 2 percent.

"On the daily chart, Nifty has formed a strong bearish candlestick, signalling negative sentiment. The index may face key resistance at 22,300, and a breakout above this level could drive further gains towards 22,530 and 22,670," said Hardik Matalia, Derivative Analyst at Choice Broking.

"On the downside, immediate support is placed at 21,929, a crucial level for monthly trends. A breakdown below this mark could push the index lower towards 21,718, reinforcing a cautious outlook as Nifty struggles to maintain support at critical levels."

Wall Street staged a modest recovery on February 28 after initially dipping on tensions surrounding a high-stakes White House meeting with Ukrainian President Volodymyr Zelenskiy. Meanwhile, Asian markets wavered today, as investors remained on edge over looming U.S. tariffs that could rattle global trade dynamics.

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