Taking Stock: Sensex, Nifty plunge after RBI keeps rates unchanged; BFSI, auto see selling

The equity benchmarks the Sensex and the Nifty ended February 8 sharply lower following the status quo maintained by the Reserve Bank of India (RBI) on key interest rates. The market has fluctuated in range for the last couple of weeks as investors have become cautious.

The Sensex closed 723.57 points or 1 percent down at 71,428.43, while the Nifty closed 212.55 points or 0.97 percent lower at 21,717.95. About 1,666 shares advanced, 2,176 declined and 103 were unchanged.

Broader markets closed lower as well but outperformed the benchmarks. Nifty Midcap 100 dipped 0.05 percent and Nifty Smallcap 100 0.39 percent.

Banks, financial services and auto — all rate-sensitive stocks — were under selling pressure during the day.

"Though FY25 GDP growth forecast has improved, the RBI remains vigilant on inflation & banking liquidity. The incomplete transmission of the cumulative 250 bps and the inflation ruling above the target level adds uncertainty about the timing of the interest rate reduction,” said Vinod Nair, Head of Research, Geojit Financial Services.

“The ripple effect was seen in the government 10yr yield, which inched higher. A large pocket of the market slid into red like FMCG, banks, and auto. FMCG got higher impacted by weak Q3 results and downgrade in volume growth, in the near-term, due to weak rural demand."

Stocks and sectors

Sectoral matrix was mixed. Nifty Private Bank was the biggest loser, down 2.59 percent. Nifty FMCG was dragged a little over 2 percent thanks to selling in ITC. Nifty Financial Services and Nifty Auto were also big losers of the day.

Nifty PSU Bank was the biggest gainer, up 2 percent while Nifty Media followed with gains of about 2 percent. Nifty Oil & Gas also added about a percent.

Nifty Nifty 50 constituents, SBI was the biggest gainer, up 3.64 percent. Bharat Petroleum, Power Grid. Coal India, Hindalco Industries and TCS rose 1-4 percent.

Kotak Mahindra Bank was the biggest loser of the day, down 3.49 percent. Britannia Industries, Axis Bank and Nestle India, Eicher Motors, and ICICI Bank were other top losers falling about 3 percent each.

OUTLOOK for Feb 9

Prashanth Tapse, Senior VP (Research), Mehta Equities

Lack of clarity on the inflation outlook also weighed on the sentiment. Selling intensified after the RBI's monetary policy announcement in the first half with heavy selling in private banking scrips leading the slump.  Banking industry has been facing liquidity issues in recent times and with the central bank's decision showing no signs of interest rate cut in the near term, investors slashed their positions in financial stocks. However, sharp gains in IT and oil & gas stocks helped markets pare losses, although underlying sentiment remains sluggish to negative. From a technical perspective, Nifty’s aggressive upside targets are still seen at 22127 mark, while make-or-break support is at 21557.

Ajit Mishra, SVP - Technical Research, Religare Broking

The fresh decline in the private banking majors and select heavyweights like ITC has again pushed the Nifty to its crucial support zone of short term moving average i.e. 20 DEMA. And, a decisive close below 21,600 would again push the bulls on the back foot. We thus suggest hedging the existing longs and waiting for clarity