Sensex and Nifty Fall Following Hawkish Fed Minutes; Analysts Keep a Close Eye on Banking Stocks

Analysts Emphasize Banking Stocks’ Role in Supporting Benchmarks to Reach New Highs.

Sensex and Nifty Decline Amid Weakness in Banking Stocks and Hawkish Fed Meeting Minutes. The Sensex and Nifty experienced a 0.6 percent decline each on February 22 morning, with the Sensex at 72,178 and the Nifty at 21,913. Analysts noted that the weakness in banking stocks was a contributing factor and highlighted the need for banking stocks to support the benchmarks in order to achieve new highs. Additionally, broader markets were also affected, with the Nifty Midcap 100 and Nifty Smallcap 100 indices slipping up to 0.5 percent.

“Bank Nifty’s Performance Critical for Benchmark’s Intermediate Trend,” Says Sameet Chavan of Angel One Sameet Chavan, Head of Research for Technical and Derivative at Angel One, emphasized the importance of closely monitoring the high-beta and supportive index Bank Nifty for developments, as its set-up would determine the intermediate trend for the benchmark. Chavan added that a strong close above the 22,150-22,200 range for the Nifty could propel the index higher towards the 22,350-22,400 zone.

Federal Reserve Meeting Minutes Impact Interest Rate Expectations Minutes from the February meeting of the US Federal Reserve, released the previous day, indicated a reluctance among officials to lower interest rates. According to the CME Fed-Watch tool, the probability of rate cuts in March decreased to 6.5 percent on February 21 from 8 percent the day before. However, expectations for a rate cut in July increased to 37.7 percent from 33.4 percent.

VK Vijayakumar of Geojit Financial Services Highlights Delivery-Based Buying in Banking Stocks Amid Expensive Market” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out a significant trend to watch: the substantial delivery-based buying in banking stocks, which are considered attractively valued in the current expensive market. He suggested that switching from overvalued mid and small caps to large private banks could be a prudent move.

Sector Performance in Morning Trade:

  • Nifty PSU Bank emerged as the worst sectoral performer within the first hour of trade, followed by Nifty Pharma and Oil & Gas indices.
  • Conversely, Nifty IT and Metal indices saw marginal gains in trade.

Fear Gauge India VIX:

  • India VIX, the fear gauge, continued to remain elevated above the 16 level, indicating that volatility is expected to remain higher in the market.

Nvidia’s Exceptional Earnings Propel US Futures and Asian Markets Higher. Following Nvidia’s impressive quarterly financial report, which led to a 9 percent surge in its shares during after-hours trading, US futures tied to Wall Street experienced a notable uptick. Dow Futures, S&P 500 Futures, and NASDAQ Futures all surged up to 1 percent. Nvidia’s remarkable performance, driven by a staggering 265 percent year-on-year revenue increase attributed to its thriving AI business, influenced the positive market sentiment.

In the Asian-Pacific region, markets followed suit with significant gains. Japan’s Nikkei 225 index soared to record highs of 38,924.8, surpassing its previous all-time high of 38,915.8 set in 1989. Additionally, Australia’s S&P 200 index traded slightly higher, while South Korea’s Kospi rose by 0.3 percent after the Bank of Korea maintained interest rates at 3.5 percent.