Sensex, Nifty Decline for Third Consecutive Session as RBI Rate Cut Fails to Lift Sentiment

Mumbai, February 7, 2025 – Indian equity markets ended lower for the third straight session on Wednesday, as the Reserve Bank of India (RBI)‘s much-anticipated 25-basis-point repo rate cut failed to boost investor sentiment. Despite the central bank lowering the repo rate to 6.25%—the first cut in nearly five years—volatility persisted as concerns over foreign investor outflows and lack of additional liquidity-easing measures weighed on banking stocks.

At close, the BSE Sensex fell 197 points or 0.3% to 77,860, while the NSE Nifty 50 declined 43 points or 0.2% to 23,559. Market breadth remained weak, with 1,468 stocks advancing, 2,293 declining, and 139 remaining unchanged.

Banking Sector Under Pressure Amid FII Selling

The banking sector bore the brunt of selling pressure, as major players like ICICI Bank and State Bank of India (SBI) dragged the Nifty Bank index down 0.6%. Analysts attributed this to the absence of additional liquidity measures from the RBI’s policy statement.

“The rate cut is a welcome move, but foreign institutional investors (FIIs) remain net sellers. Market participants are cautious, knowing that without strong liquidity support, rallies may not be sustained,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

FIIs have offloaded ₹9,709 crore worth of Indian equities in February alone, adding to concerns about near-term market weakness.

Sectoral Performance: Metals Shine, IT and FMCG Lag

Among sectoral indices, only four out of the 13 major indices ended in positive territory. The Nifty Metal index surged 2.5%, fueled by optimism over increased infrastructure and real estate activity, both of which are expected to benefit from lower interest rates.

Top Gainers:

• JSW Steel, Tata Steel, Jindal Steel, and Welspun Corp rose 3–7%, benefiting from expectations of higher demand for industrial metals.
• Bharti Airtel surged 4% after posting strong quarterly results, driven by a one-time gain and tariff hikes.

Top Losers:

• ONGC, ITC, SBI, Adani Ports, and Britannia fell 1–3%, dragging down the Nifty 50.
• Bikaji Foods tumbled 10% after reporting a 40% drop in net profit to ₹27.77 crore for Q3.
• Sonata Software slumped 11% due to weaker-than-expected margins, despite strong revenue growth.
• Ola Electric dropped over 4%, widening its Q3 net loss to ₹564 crore from ₹376 crore in the same period last year.

Real Estate and Auto Sectors Poised for Growth

Real estate and auto stocks showed resilience, as analysts expect the rate cut to boost home loan demand and discretionary consumption.

“Lower borrowing costs should improve home affordability and stimulate growth in the real estate sector. However, we are yet to see an immediate market reaction,” said Shishir Baijal, Chairman & MD of Knight Frank India.

The Nifty Auto index remained strong, buoyed by expectations of increased consumer spending post-budget.

Global Trade Uncertainty Adds to Caution

Economists also pointed to mounting global trade tensions, with the United States imposing fresh tariffs—25% on Canada and Mexico and 10% on Chinese goods—citing concerns over illegal immigration and drug trade.

“A global trade war could disrupt India’s growth, inflation, and trade dynamics, but the full impact remains unclear,” said Rajani Sinha, Chief Economist at CareEdge Ratings.

Technical Outlook: Nifty’s Key Levels to Watch

From a technical perspective, analysts suggest that Nifty 50 has strong support at 23,450–23,500.

“As long as Nifty stays above this range, an eventual breakout is likely. However, resistance lies at 23,720–23,800,” said an analyst at Indiacharts.

With FIIs building significant short positions, market watchers expect volatility to persist in the near term.

Outlook: While the rate cut is a positive development, sustained foreign investor outflows, global trade uncertainties, and lack of immediate liquidity measures from the RBI could continue to weigh on sentiment in the coming sessions.