Sensex Down 122 Points, Nifty at 23,045; Tomorrow Nifty Prediction
Tomorrow Nifty Prediction
Stock Market Update: February 12 Decline, FII Sell-Off, and Inflation Data Impacting Future Movements
The stock market closed on a slightly negative note on February 12, with Indian equity indices ending in the red after a volatile trading session.
This dip comes as investors brace for crucial retail inflation data from both India and the United States, which will likely impact market sentiment and influence the direction of the market in the near future.
The trading day saw mixed sector performance, with several large-cap stocks posting losses, while some key sectors managed to hold their ground.
Going forward, the focus will remain on the inflation figures as market participants try to predict the trajectory of the market in light of these critical data points.
Stock Market Overview
Indian equity markets experienced a modest decline on February 12, reflecting the volatility in global markets and investor uncertainty about the future direction of the economy.
The benchmark BSE Sensex ended the day at 76,171.08, down by 122.52 points or 0.16%. The Nifty 50 index also closed in the red, at 23,045.25, falling by 26.55 points, or 0.12%.
The day’s trading volume was marked by more decliners than advancers, with 1,487 stocks rising, 2,334 stocks declining, and 85 stocks remaining unchanged by the close of the session.
Several large-cap stocks contributed to the day’s losses. Among the top losers on the Nifty were M&M, Bharat Electronics, Eicher Motors, ITC, and Hero MotoCorp.
On the other hand, a few stocks managed to post gains, including SBI Life Insurance, Bajaj Finserv, HDFC Life, Shriram Finance, and Tata Steel.
While large-cap stocks led the overall market trend, the broader market also showed signs of weakness, with midcap and smallcap indices declining by about 0.5%.
Sector-wise, the market exhibited a negative trend across most sectors. All sectoral indices except PSU banks and metals closed lower.
The realty sector, in particular, suffered a significant drop, shedding nearly 3%, as concerns over high interest rates and slower economic growth weighed on the outlook for the sector.
Despite these losses, PSU banks and metals managed to post marginal gains, supported by positive stock-specific developments.
Foreign Institutional Investors (FII) Sell-Off:
One of the key factors driving the market’s recent decline has been the aggressive sell-off by foreign institutional investors (FIIs).
According to Rohit Srivastava of IndiaCharts, FIIs currently hold record short positions in terms of contracts, signaling a highly bearish sentiment.
This record shorting indicates that there is a growing level of pessimism among FIIs about the market’s near-term prospects.
However, Srivastava also suggests that this level of short interest presents an opportunity for a potential short-covering rally.
In the event of a positive market trigger, such as stronger-than-expected inflation data or any positive developments related to economic growth, there could be a sharp reversal in market sentiment, leading to a strong rally as short positions are covered.
As of now, February has seen a significant outflow of Rs 17,129.5 crore by FIIs from Indian equity markets, which has contributed to the market’s weakness.
This bearish sentiment is evident in the rising open interest in Nifty futures, which has been increasing alongside the market’s decline over the last 10 to 15 days.
Open interest in Nifty futures has surged to the highest levels in several years, indicating that market participants are increasingly betting on further downside.
This increase in open interest, coupled with the market’s fall, suggests that the current market environment is highly negative.
However, as Srivastava pointed out, such extreme pessimism could also set the stage for a recovery in the coming weeks, should the market receive a positive catalyst.
Technical Outlook:
From a technical perspective, analysts are closely watching the 22,800 level on the Nifty, as it appears to be acting as a significant support level.
This level was tested previously on January 27, when Nifty reached a bottom around that mark. On February 12, the index once again approached this level, making it a key point for traders to monitor.
If Nifty holds above this level, it could signal that the market is forming a base and could experience a rebound.
Jigar Patel, Senior Manager at Anand Rathi Shares and Stock Brokers, highlighted that the 22,800 level is likely to act as strong support for the Nifty in the short term.
Conversely, the upside resistance is seen around the 23,450 level. If the Nifty is able to break through this resistance, it could pave the way for further gains, possibly taking the index back towards 24,000 or higher in the near term.
As such, traders are advised to watch for a breakout above 23,450, which could trigger a fresh wave of buying.
Inflation Data to Impact Market Sentiment:
Looking ahead, all eyes are now on the retail inflation data from both India and the United States. The upcoming inflation figures will be critical for market participants as they try to gauge the future direction of monetary policy and the broader economic landscape.
In India, retail inflation is expected to fall sharply in January due to a slowdown in food price growth, according to a Reuters poll.
If the data confirms this softening of inflation, it could provide relief to the Reserve Bank of India (RBI), allowing the central bank to pause its tightening cycle or even reverse some of its recent rate hikes.
A reduction in inflation could be supportive for economic growth, particularly in light of the current slow pace of economic recovery.
The moderation in inflation would be especially important as it could help mitigate the negative impact of high interest rates on corporate earnings and consumer spending.
Recent economic data has shown signs of a slowdown, with sluggish corporate income growth and weak consumption figures, which have weighed on market sentiment.
A decrease in inflation could help the RBI balance the need for price stability with the objective of supporting growth, which would be a positive signal for the stock market.
On the global front, U.S. inflation data will also be in focus. With the Federal Reserve continuing its battle against inflation, any signs of cooling inflation in the U.S. could influence global risk appetite, including for Indian equities.
A lower-than-expected inflation print could provide the Fed with room to slow down its rate hikes, potentially easing pressure on global markets and boosting investor sentiment.
Final Remarks:
The stock market is currently navigating through a period of heightened uncertainty, marked by foreign institutional selling, mixed sectoral performance, and investor anxiety ahead of key inflation data.
While the market is facing challenges in the short term, particularly with heavy pessimism in the form of record short positions, technical indicators suggest that a recovery could be on the horizon if key support levels hold and a positive catalyst emerges.
In the coming days, the retail inflation data from India and the United States will be closely watched, as these figures could significantly influence market direction.
If inflation continues to soften, it could provide support for the Indian economy and the stock market, especially by alleviating some of the pressure from the Reserve Bank of India.
Investors should be prepared for potential volatility, but also stay alert for signs of a market recovery as the broader economic and inflationary trends unfold.
