Nifty, Sensex fall on last-hour selling; RBI meet, Q3 earnings eyed for cues

Nifty Auto rose over 1% thanks to gains of up to 6 percent in Tata Motors, Eicher Motors and M&M

The Indian equity benchmarks fell sharply on last-hour selling on February 5 as investors turned cautious ahead of the RBI policy outcome later in the week and the ongoing earnings season.

Investors are waiting for the Reserve Bank of India’s meet outcome on February 8 for rate cut cues and inflation forecast. Corporate earnings, too, are influencing investors' specific sectors moves.

After strong buying in November and December, foreign institutional investors (FIIs) turned net sellers in January on a firm dollar and a rise in global bond yields.

FII inflows will be keenly eyed as they have a bearing on the momentum in domestic equities. Geopolitical issues continue to be one of the major risks to the rally, analysts said.

The Sensex closed 354.21 points or 0.49 percent at 71,731, and the Nifty was down 82.10 points or 0.38 percent at 21,771. About 1,785 shares advanced, 1,593 declined, and 111 were unchanged.

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In the broader markets, BSE Midcap ended marginally higher, while the smallcap index closed marginally in the red.

Sectorally, Nifty PSU Bank led the losses, falling around half a percent. Nifty bank, FMCG and IT were also marginally in the red. Nifty pharma and Nifty Metal partially off-set the losses, rising over 1.5 percent,

The Nifty auto index was up a percent on gains of up to 6 percent in Tata Motors, Eicher Motors and M&M. Buying was also seen in Metal, Infra names.

PSU stocks on a roll

PSU index rose despite market weakness SJVN, NHPC rose up to 10 percent. PSU Insurance stocks like GIC Re, New India Assurance, LIC jumped up to 12. Oil and gas PSU stocks including IOC, GAIL, HPCL, BPCL and ONGC jumped up to 7 percent intraday.

Metal stocks like SAIL, Nalco rose up to 5 percent and energy stocks including Coal India, NLC India rallied up to 6 percent. PSU stocks have been gaining after FM announced increased allocation to several sectors in the Interim Budget presented on February 5.

Fundamental view

"The Indian market witnessed a sharp fall during the final hours of trading. The robust US job data for January indicates that the expected rate cuts from the Fed in the coming year may be less imminent," said Vinod Nair, Head of Research, Geojit Financial Services.

"This is reflected in the recent sharp climb in US bond yields to above 4 percent levels, which prompted investors to book profit from the post interim Budget rally amidst elevated valuations. However, the current drop in crude prices, provides support and restrains the decline," he added.

Technical view

"The range-bound trading action in Nifty is likely to continue until we get a decisive close below the extremes of the broad range 22,000 – 21,200. The momentum setup on the daily and hourly time frames are providing divergent signals which again suggests sideways price action," said Jatin Gedia – Technical Analyst at Sharekhan by BNP Paribas.

"Parameters are suggesting that the consolidation is likely to continue. Stock-specific action and sector rotation is likely to continue during this period of consolidation. Key support levels for Nifty are 21,640 – 21,600 while immediate hurdle zone is placed at 21,950 - 22,000, he added.

Bank Nifty closed below the key averages indicating weakness. "Overall, the Trend remains sideways and the range of consolidation is likely to be 45,000 – 47,000," said Gedia.

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