Key gauges snap 2-day losses after RBI's liquidity injection announcement

Indian equity benchmarks recovered on Tuesday after two straight days of steep decline, spurred by strong buying in banking and rate-sensitive sectors following the Reserve Bank of India’s decision to inject liquidity into the financial system. However, volatility capped gains to a large extent.  

Some of the important factors for the markets: 

Banking and financial stocks leading markets surge: The markets rally was driven by gains in banking and financial stocks after the RBI said it will purchase government securities worth Rs 60,000 crore in three tranches and announced several steps in order to inject liquidity into the banking system.  

Oil prices stabilized: Markets found some relief as oil prices retreated after the Trump administration pulled back from sanctions threats against Colombia over illegal immigration, alleviating concern about oil supply disruptions. 

Rupee fell sharply as tariff fears lifted dollar: Indian rupee depreciated by 26 paise to 86.57 (provisional) against the US dollar, as global risk sentiments were dampened amid tariff threats by the US President Donald Trump. 

Sustained FII outflows weighed on sentiment: Foreign Institutional Investors (FIIs) offloaded equities worth Rs 5,015.46 crore in the capital markets on a net basis on Monday, according to exchange data. 

Global front: European markets were trading higher with investors digesting some corporate earnings updates, and looking ahead to monetary policy announcements from the Federal Reserve and the European Central Bank for further direction. Asian markets ended mixed in thin trade as traders remained cautious ahead of the monetary policy announcements from the Bank of Canada, the US Fed and the European Central Bank later in the week. 

Finally, the BSE Sensex rose 535.24 points or 0.71% to 75,901.41, and the CNX Nifty was up by 128.10 points or 0.56% to 22,957.25.     

The BSE Sensex touched high and low of 76,512.96 and 75,622.88 respectively. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.61%, while Small cap index was down by 1.77%.

The top gaining sectoral indices on the BSE were Bankex up by 1.49%, Realty up by 1.27%, Auto up by 1.16% and Consumer Discretionary up by 0.23%, while Healthcare down by 1.92%, Industrials down by 1.61%, Capital Goods down by 1.58%, Power down by 1.47% and Utilities down by 1.44% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 4.39%, Axis Bank up by 3.82%, Bajaj Finserv up by 3.28%, HDFC Bank up by 2.51% and Tata Motors up by 2.15%. On the flip side, Sun Pharma down by 4.47%, Larsen & Toubro down by 1.32%, NTPC down by 1.27%, Power Grid Corporation down by 1.11% and ITC down by 1.08% were the top losers.

Meanwhile, trade ministers of India and Oman have reviewed progress of the proposed free trade agreement (FTA) between the two countries and focused on advancing the negotiations for the pact. The agreement was discussed between Commerce and Industry Minister Piyush Goyal and Oman's Minister of Commerce, Industry and Investment Promotion Qais bin Mohammed Al Yousef in Muscat. Goyal said ‘our talks focused on advancing negotiations on the Comprehensive Economic Partnership Agreement (CEPA), strengthening trade and investment ties, and exploring avenues to further deepen our bilateral partnership’. 

On January 14, India and Oman held the fifth round of talks for the agreement, aiming to boost bilateral economic ties. The negotiations for the agreement, officially dubbed CEPA, formally began in November 2023. In such agreements, two trading partners either significantly reduce or eliminate customs duties on a maximum number of goods traded between them. They also ease norms to promote trade in services and attract investments. Oman is the third largest export destination among the Gulf Cooperation Council (GCC) countries for India. India already has a similar agreement with another GCC member UAE which came into effect in May 2022.

The bilateral trade has declined to $8.94 billion (exports $4.42 billion and imports $4.5 billion) in 2023-24 from $12.39 billion (exports $4.47 billion and imports $7.91 billion) in 2022-23. India's key imports are petroleum products and urea. These account for over 70 per cent of imports. Other key products are propylene and ethylene polymers, pet coke, gypsum, chemicals, and iron and steel. 

The CNX Nifty traded in a range of 23,137.95 and 22,857.65. There were 28 stocks advancing against 22 stocks declining on the index. 

The top gainers on Nifty were Bajaj Finance up by 4.31%, Axis Bank up by 3.71%, Shriram Finance up by 3.56%, Bajaj Finserv up by 3.42% and HDFC Bank up by 2.67%. On the flip side, Sun Pharma down by 4.24%, Britannia Industries down by 2.15%, Hindalco down by 2.08%, Grasim Industries down by 1.75% and Bharat Electronics down by 1.69% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 50.15 points or 0.59% to 8,553.86, France’s CAC rose 40 points or 0.51% to 7,946.58 and Germany’s DAX gained 133.21 points or 0.63% to 21,415.39.

Asian markets ended mixed in thin trade on Tuesday, with several Asia-Pacific markets such as China, South Korea, Taiwan and Indonesia were closed for the Lunar New Year holidays. Meanwhile, investors were cautious on renewed concerns about US President Donald Trump’s tariff plans and investors awaited cues from this week's US Fed and ECB meetings. Japanese shares declined amid heavyweight chip-related shares extended losses for the second day by tracking an overnight drop in the tech-heavy Nasdaq index in the Wall Street market, as Chinese AI startup DeepSeek’s challenge to America’s global leadership in artificial intelligence threatens Asian tech companies part of the United States.