Sensex, Nifty 50 See Volatility Amid SEBI’s New Stock Market Regulations
On February 27, 2025, the Indian stock market exhibited a mixed performance, with benchmark indices experiencing marginal fluctuations amid sector-specific developments and regulatory changes.
Market Overview
The S&P BSE Sensex opened in positive territory, advancing 56.45 points (0.08%) to 74,658.57 in the early trading hours. Similarly, the NSE Nifty 50 index added 19.80 points (0.09%), reaching 22,567.35. Despite the initial gains, market breadth remained weak, with 1,348 shares rising and 1,487 shares declining on the BSE. This trend indicates cautious investor sentiment ahead of the monthly derivatives expiry.
Sectoral Highlights
Financial Services: The financial sector outperformed, buoyed by the Reserve Bank of India’s (RBI) decision to ease capital requirements for microloans and bank credit. This regulatory relaxation is expected to enhance credit flow and reduce interest rates for small borrowers and non-bank lenders. Notable gainers included Bandhan Bank, which surged approximately 6%, and Shriram Finance, AU Small Finance Bank, and Ujjivan Small Finance Bank, each rising around 5%.
Automobile Sector: In contrast, the automobile sector faced headwinds, with the Nifty Auto index declining by about 1%. Mahindra & Mahindra led the downturn, falling 1.4% after a 4% gain over the previous two sessions. The sector’s performance was influenced by profit-booking and concerns over future demand amid economic uncertainties.
Cement Industry: UltraTech Cement experienced a significant drop of approximately 5%, reaching its lowest levels since early June. The decline followed the company’s unexpected announcement of entering the wires and cables business, raising concerns about potential capital allocation risks. This move also impacted existing players in the wires and cables industry, with Havells India and PolyCab India tumbling 6% and 13%, respectively.
Regulatory Developments
The Securities and Exchange Board of India (SEBI) proposed new measures to tighten regulations in the equity derivatives market. The proposals include linking market-wide position limits for single-stock derivatives to the cash market and setting specific criteria for index derivatives. These initiatives aim to mitigate excessive volatility and potential manipulation in the derivatives segment.
Foreign Investment Trends
Foreign portfolio investors (FPIs) continued their selling spree, offloading shares worth ₹3,529.10 crore on February 25, 2025. In contrast, domestic institutional investors (DIIs) were net buyers, purchasing equities totaling ₹3,030.78 crore. The persistent FPI outflows are attributed to global economic uncertainties and a strengthening U.S. dollar, which have diminished the appeal of emerging markets like India.
Market Outlook
Analysts anticipate a gradual and partial recovery in Indian equities over the coming months. The Nifty 50 index has declined approximately 14% from its peak in September 2024, marking its longest losing streak since 1996. Factors such as high inflation, stagnant incomes, and significant foreign investor sell-offs have contributed to this downturn. However, expectations of modest easing by the RBI and potential government measures to boost household consumption may support a market rebound.
In summary, the Indian stock market on February 27, 2025, reflected a balance of positive momentum in financial stocks due to regulatory easing and challenges in sectors like automobiles and cement. Ongoing regulatory reforms and foreign investment trends will likely continue to influence market dynamics in the near term.
