India's benchmark indices, Sensex and Nifty, ended marginally lower for the third session on February 20, dragged lower by financial stocks as global trade tensions weighed on investor sentiment. Concerns over sluggish earnings growth, premium valuations, and uncertainty surrounding U.S. trade policies fueled the sell-off.
At close, the Sensex was down 222 points or 0.3 percent at 75,716, while the Nifty slipped 26 points, or 0.1 percent to 22,906. On the NSE, 1,861 stocks advanced while 727 declined. So far in 2025, Indian equities have shed over 3 percent and are down nearly 13 percent from their record highs in late September.
The session opened in the red, mirroring weakness across Asian markets, as investors braced for the inflationary effects of fresh U.S. tariff measures. On February 19, Trump announced plans to impose tariffs of 25 percent or more on auto, pharmaceutical, and semiconductor imports. While South Korea and Japan are among the most exposed in auto exports, India’s extensive pharmaceutical trade with the U.S. faces potential headwinds.
"The result season is behind us, so any volatility caused by earnings announcements has settled. Additionally, most of Trump's policy announcements have already been factored into the market. There are no new triggers or concerns that could significantly impact sentiment," said Amish Shah, Research Analyst at Taurus Corporate Advisory Services.
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"Even the upcoming fourth-quarter results are largely discounted. As a result, market volatility has reduced, and indices are moving within a range. The duration of this range-bound movement is uncertain, unless Foreign Institutional Investors (FIIs) return as net buyers—at least on a weekly basis—or their selling slows down significantly," Shah added.
Meanwhile, minutes from the U.S. Federal Reserve’s January policy meeting signalled concerns over Trump's proposed tariffs potentially stoking inflation, raising the likelihood of interest rates staying higher for longer. Historically, higher U.S. rates dampen the appeal of emerging markets like India, leading to capital outflows. In February alone, FIIs have dumped Rs 30,216 crore worth of Indian equities, while domestic institutional investors (DIIs) have absorbed Rs 35,809 crore.
"One key issue is that India’s economic slowdown is now widely acknowledged," said Shah. "Corporate earnings have also failed to meet expectations," Shah said.
Mid and small-caps outperformed the benchmarks with the BSE Midcap and the BSE Smallcap index advancing over 1 percent each. However, despite the rebound, both indices remain sharply off their peaks, with mid-caps down 17 percent and small-caps 21 percent from all-time highs.
"I expect small caps to see more limited downside, while mid caps could face slightly more pressure due to their higher FII exposure and valuation concerns," said Aishvarya Dadheech, Founder & CIO of Fident Asset Management. "If macro risks intensify—such as weaker GDP growth or increased global risk-off sentiment—mid and small caps could face additional headwinds," Shah noted.
Sectoral trends were mixed, with financial stocks leading the declines. Nifty Bank and Nifty Private Bank slipped over half a percent each. In contrast, oil & gas, auto, metal, realty, and PSU Bank stocks emerged as top gainers, rising over percent each.
The Nifty FMCG index extended its record-breaking losing streak to 14 sessions, wiping out Rs 2.7 lakh crore in investor wealth. The post-budget rally, driven by personal income tax benefits, has faded, with focus shifting back to weak demand and margin pressures, according to CNBC-TV18.
Tobacco stocks saw a sharp sell-off amid reports that the Goods and Services Tax (GST) Council may consider hiking GST rates on cigarettes and other tobacco products. According to the Economic Times, the proposed increase could take effect once the compensation cess on these items is removed. ITC shares slid over 1 percent, while Godfrey Phillips plunged 9 percent and VST Industries slumped 3.5 percent.
RateGain shares surged over 6 percent after Thailand-based Nok Air partnered with AirGain to enhance its pricing strategies. Meanwhile, Palantir Technologies sank 10 percent following reports that U.S. Defense Secretary Pete Hesgeth plans to slash military spending.
Among the biggest laggards on the Nifty 50, HCLTech, Tech Mahindra, Tata Consumer, Maruti Suzuki, and HDFC Bank declined 1-2 percent. On the other hand, Adani Ports, BEL, M&M, NTPC, and Shriram Finance led the gainers, rising 2-4 percent.
"Technically, support levels around 22,800-22,700 are being considered, but these levels need to be reassessed daily," Shah cautioned, as investors continue to search for a firm bottom in the market.
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