IT selloff erases early gains as Sensex and Nifty end nearly flat despite strong undertone
| Index | Price | Change | % Chg |
| Nifty 50 | 25,776.00 | 48.45 | +0.19% |
| Nifty Bank | 60,238.15 | 196.85 | +0.33% |
| Nifty Financial | 27,802.55 | 128.50 | +0.46% |
| BSE SENSEX | 83,817.69 | 78.56 | +0.09% |
Indian benchmark indices closed almost flat on February 4 in a session marked by sharp sectoral divergence, where a heavy selloff in large-cap IT stocks neutralised gains in autos, metals, energy and consumer-facing names. While the headline indices showed only marginal movement, the underlying market action was far more dynamic, reflecting a tug-of-war between global caution and domestic optimism.
Both the Sensex and Nifty extended their winning streak to a third session, but the pace of gains slowed considerably compared to the previous day’s rally. The market opened on a weak note as IT heavyweights dragged the indices lower in early trade. However, steady buying interest in non-IT sectors helped benchmarks recover from their intraday lows and maintain a positive close.
At the end of the session:
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Nifty 50 closed at 25,776, up 0.19% (48 points)
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Sensex ended at 83,817.69, up 0.09%
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Bank Nifty finished at 60,238.15, up 0.33%
The recovery from the day’s low of 25,563.95 in Nifty indicated that buyers were willing to step in on dips, even as select heavyweights remained under pressure.
Also Read : Bank of America Sees Rupee Strength, Limited RBI Intervention — Turning Point for the Currency?
Trade deal optimism supports sentiment but follow-through buying remains selective
Sentiment continued to draw support from the recently announced India–US trade agreement, which has improved the medium-term outlook for several export-oriented and cyclical sectors. Tuesday’s rally was largely driven by that optimism, and Wednesday’s session showed the market trying to build on those gains, albeit cautiously.
However, investors appeared more selective, preferring stock- and sector-specific opportunities rather than broad-based exposure. Traders noted that while the trade deal narrative is positive, the absence of a formally signed framework or detailed documentation has kept some participants from taking aggressive positions.
Forex market participants echoed similar caution, saying optimism is present but tempered. This explains why the equity market showed resilience but not exuberance.
Broader market strength shows risk appetite remains healthy
Even though the indices ended nearly flat, the broader market told a stronger story. Mid-cap and small-cap stocks outperformed, suggesting that domestic investors are still willing to deploy capital in growth and momentum names.
Market breadth remained decisively positive:
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Advancers: 2,153 stocks
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Decliners: 1,048 stocks
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52-week highs: 34
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52-week lows: 55
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High band hitters: 121
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Low band hitters: 51
Such breadth indicates rotation rather than withdrawal of money from equities. Institutional desks said this pattern is typical in consolidation phases, where leadership shifts across sectors.
IT sector drag intensifies as AI concerns weigh on valuations
The biggest drag on the market came from the IT sector, which fell 5.87% and significantly underperformed the broader indices. Selling pressure was broad-based across frontline IT names and aligned with global weakness in technology stocks.
Major losers included:
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Infosys −7.37%
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TCS −6.99%
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HCL Tech −4.58%
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Tech Mahindra −4.52%
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Wipro −3.79%
The selling was linked to rising global concerns that artificial intelligence could disrupt traditional IT services and outsourcing models. Investors are reassessing whether long-term growth assumptions for the sector need recalibration.
A market participant said, “AI disruption is no longer theoretical. It is influencing how investors value IT businesses.”
Domestic sectors absorb pressure as rotation theme strengthens
Even as the sharp correction in IT stocks weighed on headline indices, the broader market found stability through a visible rotation into domestic and cyclical sectors, highlighting that investors were not exiting equities but actively reallocating capital. This rotation helped cushion the benchmarks from deeper losses and reflects a market that is becoming more selective rather than broadly risk-off.
Buying interest was particularly strong in sectors linked to domestic consumption, infrastructure activity and energy demand — areas seen as relatively insulated from global technology volatility and more directly tied to India’s internal growth cycle. Consumer durables, oil & gas, metals, auto and realty stocks attracted steady inflows through the session, with several names witnessing both dip-buying and momentum-driven accumulation.
Sectoral performance underscored this pattern:
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Consumer Durables rose 2.66% as discretionary demand themes remain intact
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Oil & Gas gained 2.08% supported by energy demand and PSU strength
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Metals climbed 1.27% amid global commodity stability
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Auto advanced 1.18% as volume outlook remains resilient
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Realty added 1.12% on continued housing traction
Earnings and order flows drive strong stock-specific moves
Beyond sector trends, Wednesday’s session also highlighted the market’s growing focus on company-specific fundamentals. Earnings announcements, order wins and corporate developments drove sharp moves in several stocks, reinforcing the importance of bottom-up investing in a consolidating market.
Sheela Foam surged 14% after reporting strong quarterly numbers, with investors reacting to margin improvement and demand visibility. Sigachi Industries jumped 15% following management developments, while Capacite Infraprojects gained 8% after securing a ₹445-crore order, underscoring how order inflows continue to drive re-rating in infrastructure plays.
NBCC rose 3.5% on fresh project wins, while Emami and Pidilite Industries advanced after delivering steady Q3 results. Financial services platform Angel One gained on robust January metrics, indicating sustained retail trading activity. Axiscades moved higher after a $1.4-million contract win, and Yes Bank edged up following regulatory approval for leadership appointments.
Here’s what happened today and why traders reacted
Wednesday’s session was shaped by multiple cross-currents, resulting in a volatile yet range-bound market. Traders entered the day cautious after global tech weakness but gradually turned selective buyers as domestic sectors showed resilience.
Key drivers behind trader reaction included:
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Sharp IT selloff linked to global AI concerns
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Profit booking after Tuesday’s strong rally
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Sectoral rotation into cyclicals and defensives
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Falling volatility encouraging dip buying
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Positive broader market breadth
Intraday recovery from lower levels signalled that traders are still inclined to buy declines, but with tighter risk management. Derivatives desks reported balanced positioning rather than aggressive directional bets.
Falling India VIX signals calmer risk environment
The India VIX dropped nearly 5% to 12.25, indicating a decline in perceived near-term market risk. Lower volatility typically supports equity valuations and encourages options writing strategies, as traders anticipate narrower price swings.
A declining VIX also aligns with the consolidation phase visible in benchmark indices. Market participants said the fall in volatility suggests that traders do not expect sudden shocks in the immediate term, though they remain watchful of global cues.
Technical setup shows consolidation with positive bias
From a technical standpoint, Wednesday’s price action resembled a pause after a strong upward move. The formation of a small bullish candle with minor shadows indicates indecision but not weakness.
Analysts highlighted that the large upside gap from Tuesday remains largely intact, which keeps the short-term trend positive. Momentum indicators continue to align with the broader uptrend, and moving averages are sloping upward.
Key levels to watch:
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Support: 25,650–25,600
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Crucial support: 25,500
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Resistance: 25,800–26,000
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Next target: 26,350
As long as support zones hold, technicians believe dips may attract buyers.
Options data highlights 26,000 as key resistance
Weekly options positioning shows 26,000 as a major resistance zone, where maximum call open interest is concentrated. This suggests traders expect supply pressure near that level.
On the downside, 25,500 has the highest put open interest, making it a strong support base. Such positioning often defines short-term trading ranges and influences intraday volatility.
Derivatives analysts say a decisive move beyond these levels could trigger fresh momentum trades.
Rupee slips after prior surge despite positive cues
The rupee weakened 11 paise to 90.43 against the US dollar after Tuesday’s record rally. The currency moved between 90.26 and 90.54 during the session as importers and corporates reportedly bought dollars.
Forex traders noted that while sentiment improved after the trade deal announcement, caution remains because a formal framework text is yet to be released. Currency markets often respond to documentation clarity, not just headlines.
The rupee’s pullback is viewed more as a technical adjustment than a reversal in sentiment.
F&O ban list shows heavy speculative interest
Derivative activity remained elevated, with SAMMAANCAP in the F&O ban period. Several stocks, including RVNL, BDL, IEX, RBL Bank, IRCTC and HUDCO, approached market-wide position limits.
Such crowded positioning typically reflects strong speculative interest and can lead to sharp moves when positions unwind. Traders often monitor these lists to assess risk concentration in the system.
Growth optimism from Mukesh Ambani adds macro support
Reliance Industries Chairman Mukesh Ambani’s comments on India’s growth potential added a supportive macro narrative. His assertion that 8–10% growth is achievable and double-digit expansion cannot be ruled out reinforces long-term optimism about India’s economic trajectory.
He also emphasised policy continuity, energy independence prospects and the role of financial platforms like JioBlackRock in converting savings into productive investments. Such themes resonate with long-term investors focusing on India’s structural story.
Airtel earnings preview keeps telecom theme active
Bharti Airtel remains in focus ahead of its Q3 results, with brokerages expecting around 18% YoY revenue growth and ARPU nearing ₹258. Strong performance in broadband and African operations is seen supporting profitability.
Telecom continues to be a key theme for margin expansion and pricing power, making it closely tracked by institutional investors.
What this means for investors and portfolios
For investors, Wednesday’s session reinforces the need for selective exposure. IT may remain volatile, while domestic cyclicals and earnings-driven names could offer relative strength.
Diversification and sector allocation are becoming more critical as leadership rotates.
What to watch in the coming sessions
Key triggers ahead include RBI policy signals, FPI flows, global tech sentiment and Nifty’s ability to sustain above 25,500 and challenge 26,000.
As long as support zones hold, analysts see the broader structure as constructive. The market appears to be digesting gains while preparing for the next directional move.
FAQs Markets Rebound From Lows
Q) Why did the Indian stock market end flat even after positive sentiment from the India–US trade deal?
The market ended flat because gains from trade-deal optimism and buying in domestic sectors like auto, metals and oil & gas were offset by a sharp selloff in heavyweight IT stocks. Since IT companies carry high weight in indices like Nifty and Sensex, their decline limited overall index gains even though broader market breadth remained positive.
Q) How does a sharp fall in IT stocks impact Nifty and Sensex more than other sectors?
IT stocks such as TCS and Infosys have large index weightages, meaning their price movements significantly influence benchmark indices. Even if multiple smaller sectors rise, a steep fall in IT can neutralize those gains, resulting in flat or muted index performance.
Q) What does sectoral rotation from IT to domestic sectors signal for investors?
Sectoral rotation usually indicates that investors are reallocating capital rather than exiting the market. Moving from IT to domestic sectors suggests preference for India-focused growth themes like consumption, infrastructure and energy, which may offer better near-term earnings visibility.
Q) Why is a falling India VIX considered positive for equity investors?
A falling India VIX indicates lower expected volatility. This generally boosts investor confidence, supports higher valuations and encourages options writers and positional traders to take exposure, as the likelihood of extreme price swings reduces.
Q) How should retail investors adjust portfolios during sectoral divergence in the market?
During divergence, investors often benefit from diversification and selective stock picking. Rather than chasing momentum, focusing on companies with strong earnings visibility, manageable valuations and sector tailwinds can help reduce portfolio volatility.
Q) What does it mean when markets consolidate after a strong rally?
Consolidation is a phase where markets trade in a narrow range after a sharp move. It allows valuations to stabilise and weak hands to exit. This phase is often healthy in an uptrend, as it can prepare the market for the next leg higher if support levels hold.
Q) How do F&O ban lists and high MWPL levels affect stock price behaviour?
When stocks enter or near the F&O ban due to high market-wide position limits, it signals crowded trades. This can increase volatility because traders may rush to unwind positions, leading to sharp price swings in either direction.
