Indian stock markets continued their downward trend on Tuesday, with the Nifty 50 and Sensex closing in the red for the seventh consecutive session.
Early gains were wiped out due to mid-session selling pressure, though the intensity of selling has eased over the past two trading days.
The 30-share BSE Sensex dipped 32.11 points or 0.04 per cent to settle at 76,138.97. The index stayed in the positive zone for the most part of the session. The benchmark gyrated 751.1 points between the day's high of 76,764.53 and low of 76,013.43. The NSE Nifty slipped 13.85 points or 0.06 per cent to 23,031.40.
Despite domestic inflation cooling more than expected in January, investor sentiment took a hit following a hotter-than-anticipated inflation report in the United States.
The data dampened hopes of multiple interest rate cuts by the Federal Reserve this year, causing concern among market participants. Additionally, escalating global trade tensions have kept investors on edge, contributing to cautious trading.
Vinod Nair, Head of Research at Geojit Financial Services, noted that early optimism from easing domestic inflation was overshadowed by weak global cues and lacklustre corporate earnings.
"A surge in Chinese technology stocks, driven by rising interest in artificial intelligence, has also diverted foreign institutional investors towards more attractive markets," Nair added.
He also pointed out that investors are closely monitoring discussions between Donald Trump and Narendra Modi for any potential trade and tariff concessions that could trigger a relief rally.
Foreign Investors Continue to Offload Indian Equities
Foreign Portfolio Investors (FPIs) have been aggressively selling Indian equities, with outflows reaching ₹22,098 crore so far in February. On Monday alone, FPIs pulled out ₹4,969 crore from Indian markets, according to data from Trendlyne.
Analysts attribute the sell-off to both domestic and global factors. On the domestic front, stretched valuations, modest corporate earnings in the third quarter, and slowing economic growth have made investors cautious.
Globally, Trump’s renewed tariff threats and the Federal Reserve’s reluctance to cut interest rates have driven US bond yields higher, making American assets more attractive than emerging markets like India.
The US 10-year Treasury yield rose by more than 9 basis points to 4.633% after inflation data showed a 0.5% rise in the Consumer Price Index for January, bringing annual inflation to 3.0%.
The unexpected rise in inflation has raised concerns that the Federal Reserve may delay interest rate cuts, further strengthening the appeal of fixed-income assets over equities.
Prashanth Tapse, Senior Vice President (Research) at Mehta Equities, said that continued selling by FIIs has increased market volatility.
"Profit booking is being seen in select heavyweight stocks, particularly in banking, auto, IT, and FMCG sectors. This dragged key benchmark indices lower, despite early gains in the session," he added.
Technical Outlook
The Nifty index opened on a positive note but faced selling pressure in the latter half of the session, ultimately ending flat to negative at 23,031.
The India VIX, a measure of market volatility, cooled slightly from 15.47 but still settled 0.40% higher at 14.96.
Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates, pointed out that Nifty has formed a small red candle with a long upper shadow, signalling selling pressure at higher levels.
"The 21-day Simple Moving Average is positioned at 23,270, making the 23,270-23,300 zone a strong resistance. On the downside, 22,780 is expected to act as a key support level. As long as Nifty holds above 22,780, a buy-on-dips strategy remains favourable," he said.
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