Sensex plunges 850 pts from day's high post-rate cut: RBI's GDP growth forecast among key factors to spook markets

Equity benchmarks Sensex and Nifty traded lower on February 7 despite the Reserve Bank of India's (RBI) first interest rate cut in nearly five years.

Equity benchmarks Sensex and Nifty were settled lower on February 7 despite the Reserve Bank of India's (RBI) first interest rate cut in nearly five years. Investors remained cautious as the 25-basis point (bps) reduction was largely priced in and concerns over economic growth and global cues weighed on sentiment.

Sensex closed 211.41 points or 0.27 percent lower at 77,846.74. During the day, it slid 582.42 points or 0.74 percent to the day's low of 77,475.74. Nifty settled 43.40 points or 0.18 percent lower at 23,559.95. About 1,152 shares advanced, 2,281 shares declined, and 124 shares unchanged. Ten out of the 13 sectors were trading in red.

"The move was already factored in, particularly in banking, auto, and real estate stocks, which had rallied in recent sessions but failed to find fresh momentum post-announcement," said Ajit Mishra, Senior Vice President at Religare Broking.

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1) Growth Forecast Cut: RBI sees GDP growth for FY26 at 6.7 percent. The April-June quarter projection was lowered to 6.7 percent from 6.9 percent, while the July-September forecast was cut to 7 percent from 7.3 percent. Growth for the October-December quarter was estimated at 6.5 percent. The downward revision has raised concerns over the pace of economic recovery.

2) Mixed Corporate Earnings: Q3 results have failed to inspire investor confidence. Shares of ITC slipped up to 3 percent, hitting an intraday low of Rs 429.5, as the company reported a 7 percent decline in profit to Rs 5,013.2 crore. Meanwhile, Swiggy shares fell another 2 percent, hitting fresh lows after a weak quarterly performance.

As many as 37 companies that are part of the benchmark Nifty 50 index have announced their December quarter numbers and a little more than half – 19 to be precise – have missed analyst estimates with the remaining managing to better the projections, reported Moneycontrol earlier this week.

Among the Nifty heavyweights, ICICI Bank, Bharti Airtel, Reliance Industries, BPCL, Infosys, and TCS posted stronger-than-expected results. On the other hand, Coal India, ONGC, Tata Motors, JSW Steel, IndusInd Bank, and Ultratech Cement missed estimates.

Sonam Srivastava, Founder and Fund Manager at Wright Research PMS added while markets may react positively in the short term, the long-term impact will hinge on external risks and the effectiveness of fiscal measures in driving growth without reigniting inflation.

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3) Weak Global Cues: Asian markets also remained under pressure. Japan’s Nikkei 225 closed 0.72 percent lower, while South Korea’s KOSPI also declined. Additionally, foreign institutional investors (FIIs) continued to sell equities, offloading shares worth Rs 3,549.95 crore on Thursday. In January, foreign portfolio investors (FPIs) sold equities worth Rs 78,027 crore.

Trump’s tariff policies have added to global investor concerns. The U.S. President imposed a 25 percent tariff on imports from Canada and Mexico, although these tariffs have been put on hold for 30 days, their scale continues to pose a risk. At the same time, a 10 percent tariff on Chinese imports has come into effect.

Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, said that while the RBI’s rate cut was expected, broader concerns around global trade, fiscal challenges, and uncertainty over the cut’s impact on growth have kept investors cautious.

"For bond market investors, falling interest rates generally mean higher bond prices, and that’s exactly what’s happening, the 10-year benchmark bond yield dropped by 20 basis points, making existing bonds more valuable."

Banking stocks also declined as the RBI’s latest monetary policy measures did not include additional liquidity easing steps. In the previous MPC meeting in December 2024, then-RBI Governor Shaktikanta Das announced that the central bank was reducing the Cash Reserve Ratio (CRR) by 50 basis points to 4 percent. After this, the RBI introduced a series of measures in January to improve liquidity, injecting Rs 1.5 lakh crore into the system. As a result, investors were expecting the RBI to announce steps beyond the anticipated cut in the repo rate.

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