In a highly volatile session, Indian equity benchmarks erased initial gains and ended flat on Wednesday as investors stayed on the sidelines ahead of Reserve Bank of India's (RBI) interest rate decision, which is scheduled for Thursday. Markets opened on a positive note and consolidated during the day, as traders took some support with the provisional data from the NSE showing that foreign institutional investors (FIIs) net bought shares worth Rs 92.52 crore on February 6, 2024. Some encouragement came after Finance Minister Nirmala Sitharaman said that retail inflation has come down to within the tolerance band due to steps taken by the government to check price rise in essential commodities, especially in perishable commodities. Some support also came with Moody's Investors Service stating that growth in Asia Pacific will decelerate in 2024 as a downshift in China's growth trajectory will spill over in the region through trade in goods and services, but India will be able to mitigate the challenge aided by robust domestic demand. However, markets erased all of their gains in afternoon deals and fell into red terrain as traders turned cautious as India's aggressive fiscal consolidation objective for next year is already being doubted, with Fitch Ratings saying it expects the target of 5.1 percent of GDP to be missed by as much as 30 basis points. Some concern also came with a private report stating that businesses' one-year-ahead inflation expectations rose sharply to 4.58 percent in December 2023 from 4.04 percent in October 2023. Markets wiped out losses to end flat amid positive cues from other Asian markets along with buying in Realty and Telecom stocks. Finally, the BSE Sensex fell 34.09 points or 0.05% to 72,152.00 and the CNX Nifty was up by 1.10 points or 0.01% to 21,930.50.

The US markets ended higher on Wednesday as investors applauded overall strength in U.S. earnings. A positive reaction to some of the latest earnings news contributed to notable advance seen over the course of the session. Share of Enphase Energy (ENPH) soared by 16.9 percent after the solar inverter maker reported weaker than expected fourth quarter revenues but said it expects demand to improve throughout 2024. Auto giant Ford (F) also surged by 6.1 percent after reporting better than expected fourth quarter results, providing upbeat guidance for 2024 and announcing a supplemental dividend of 18 cents per share. On the sectoral front, Software stocks turned in some of the market's best performances on the day, driving the Dow Jones U.S. Software Index up by 1.9 percent to a record closing high. Significant strength was also visible among semiconductor stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Semiconductor Index. On the economic data front, with imports increasing by more than exports, the Commerce Department released a report showing the U.S. trade deficit widened in the month of December. The Commerce Department said the trade deficit increased to $62.2 billion in December from a revised $61.9 billion in November. Street had expected the trade deficit to narrow to $62.2 billion from the $63.2 billion originally reported for the previous month. The wider trade deficit came as the value of imports shot up by $4.2 billion or 1.3 percent to $320.4 billion, while the value of exports jumped by $3.9 billion or 1.5 percent to $258.2 billion. Imports of consumer goods, including pharmaceuticals, cell phones and other household goods, led the surge in imports, while imports of industrial supplies and materials also saw a notable increase.

Crude oil futures ended higher on Wednesday, magnifying their previous session's gains. Concerns about potential supply disruptions due to escalation in geopolitical tensions supported oil prices. However, gains were limited as data from U.S. Energy Information Administration (EIA) showed that crude inventories in the U.S. increased by 5.5 million barrels in the week ended February 2nd, nearly three times the expected increase of 1.9 million barrels. Meanwhile, the American Petroleum Institute said in its weekly report on Tuesday that crude oil inventories rose by 674,000 barrels in the week to February 2, much less than an expected increase of 2.13 million barrels. Benchmark crude oil futures for March delivery surged $0.55 or about 0.75% to settle at $73.86 a barrel on the New York Mercantile Exchange. Brent crude for April delivery rose $0.62 or about 0.78% to $79.21 per barrel on London's Intercontinental Exchange.  

Indian rupee ended higher against the dollar on Wednesday tracking a correction in the greenback against major currencies and fresh foreign capital inflows. Traders got encouragement as finance minister Nirmala Sitharaman said that retail inflation has come down to within the tolerance band due to steps taken by the government to check price rise in essential commodities, especially in perishable commodities. On the global front, sterling rose on Wednesday after data showing rising house prices in Britain supported bets that the Bank of England (BoE) was not likely to cut interest rates any time soon, while ringgit closed higher against the US dollar in tandem with regional currencies as the greenback retreated from recent three-month peaks although staying firm hovering just below its strongest levels since early November. Finally, the rupee ended at 82.96 (Provisional), stronger by 9 paise from its previous close of 83.05 on Tuesday.

The FIIs as per Wednesday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 16366.95 crore against gross selling of Rs 16839.72 crore, while in the debt segment, the gross purchase was of Rs 3728.82 crore with gross sales of Rs 567.28 crore. Besides, in the hybrid segment, the gross buying was of Rs 957.60 crore against gross selling of Rs 18.67 crore.

The US markets ended higher on Wednesday as strong earnings offset jitters related to U.S. regional banks and China's markets. Asian markets are trading mixed on Thursday as investors look toward China's inflation figures and there are expectations of 0.5 percent fall year-on-year. Indian equity benchmarks ended choppy session flat on Wednesday as IT stocks fell most on profit taking after recent strong gains. Today, markets are likely to get flat to positive start tracking overnight gains on Wall Street, and as the market participants awaits the Reserve Bank of India's (RBI) monetary policy outcome later in the day. Most market participants expect that the RBI MPC will hold the key interest rate steady at 6.5 per cent. There are expectations that the rates to remain unchanged until at least July as India's CPI remain closer to the upper price band of 6 per cent. Some support will come as responding to concerns about inflation, Union Finance Minister Nirmala Sitharaman said that CPI inflation was within the tolerability threshold of 4 per cent (+/-2%). She also said India's debt-to-GDP ratio is well below other emerging markets. Traders may take note of a private report that India is close to finalizing a first-of-its-kind trade deal that could see a small group of European nations invest as much as $100 billion over 15 years in exchange for easier trade access to the world's most populous nation. However, higher US bonds yields may restrict gains in the markets as comments from Federal Reserve officials reaffirmed expectations that the central bank may not cut rates soon. Surge in oil prices in early deals after Israel rejected a ceasefire offer from Hamas, as talks continued to try to end the Gaza conflict and wider Middle East tensions that have kept the market on edge since October, may dampen sentiments. Also, foreign fund outflows likely to dent sentiments in domestic markets. Foreign institutional investors (FIIs) net sold shares worth Rs 1,691.02 crore on February 7, provisional data from the NSE showed. Meanwhile, China has said that it will retain the anti-dumping duties on imports of o-chloro-p-nitroaniline originating in India for another five years, starting from February 13. Rate-sensitive stocks in real-estate, banks, financials and auto pockets will be in focus. Investors will also react to Q3 earnings of Tata Consumer, Lupin, Cummins and Apollo Tyres, among others.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Power Grid Corporation of India has reported 10.51% rise in consolidated net profit at Rs 4,028.25 crore for Q3FY24 as compared to Rs 3,645.29 crore for same quarter in previous year.
• Oil and Natural Gas Corporation has signed a Cooperation Agreement with TotalEnergies to carry out methane emissions detection and measurement campaigns.
• Nestle India has reported 4.39% rise in its net profit at Rs 655.61 crore for fourth quarter ended December 31, 2023 over net profit of Rs 628.06 crore for same quarter in previous year.
• Britannia Industries has reported 40.41% fall in its consolidated net profit at Rs 555.66 crore for Q3FY24 as compared to Rs 932.40 crore for the same quarter in the previous year.