Markets witness heavy losses, mid and small-cap stocks underperform, while global uncertainties and economic factors drive investor sentiment.
February 15, 2025: The Nifty-50 Index and Sensex each saw a 3% decline, reflecting a renewed risk-off sentiment in the markets. The broader indices witnessed deeper cuts, with the mid-cap index losing 8.5% and the small-cap index dropping 10.5%, sharply underperforming large-caps.
The market remains cautious due to three major downside risks:
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- Tariffs imposed by the US on India, impacting trade relations.
- Uncertain domestic growth, leading to concerns about economic recovery.
- Tepid management commentary from the Q3FY25 earnings season, weighing on investor sentiment.
All sectoral indices ended in the red, with some facing steep losses:
- Realty (-10%)
- Auto (-6.7%)
- Capital Goods (-6.3%)
- Power (-7.3%)
- Metal (-4.9%)
Other sectors recorded losses in the range of 2-5%.
Despite the bearish trend, some stocks bucked the trend and posted gains:
- Bharti Airtel (+2.3%)
- Britannia (+1.4%)
- Bajaj Finserv (+2.2%)
On the other hand, the biggest losers were:
- Eicher Motors (-12.3%)
- Hero Motocorp (-9.6%)
- BEL (-9.4%)
Foreign Portfolio Investors (FPIs) remained net sellers, while Domestic Institutional Investors (DIIs) emerged as net buyers over the last five trading sessions.
Key Economic Developments Driving Markets
- The RBI cut interest rates by 25 bps, aiming to stimulate growth.
- January CPI inflation softened to 4.3% (vs. 5.2% in December), providing some relief.
- IIP growth for December moderated to 3.2% (compared to 5.2% in November), indicating slowing industrial momentum.
Global Market Trends
- In the US, all major indices are set to end the week on a positive note. However, investor focus remains on the upcoming Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge.
- President Donald Trump’s threat of reciprocal tariffs could impact $600 billion worth of goods imported from the EU in 2024, raising concerns over a potential trade war.
- European stock markets hit record highs earlier this week, driven by corporate earnings and economic optimism.
- In Asia, India and the US have pledged to more than double bilateral trade to $500 billion by 2030, signaling strengthening economic ties despite trade tensions.
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Market Outlook
While the market sentiment remains cautious, factors such as rate cuts, cooling inflation, and global trade discussions could play a crucial role in determining the next market direction. Investors should closely monitor global economic trends, central bank policies, and corporate earnings for further cues.