IT, metal stocks drag Sensex, Nifty for fifth day; TCS, Infy, HCL Tech lead fall

The Indian share market continued its losing streak for the fifth straight session on Monday, while it ended lower in 14 out of 17 sessions so far in February. The BSE benchmark Sensex has fallen nearly 3,000 points in February, while the NSE Nifty50 has lost nearly 1,000 points during the same period as equity market faced headwinds from relentless FII selling and global uncertainties relating to Trump tariffs.

On Monday, the 30-share Sensex closed 856 points lower at 74,454, and the Nifty50 settled 243 points lower at 22,552 amid broad-based selling across indices. The broader market also saw correction, with BSE midcap and BSE smallcap indices falling 0.8% and 1.3%, respectively.  The market capitalisation of BSE-listed companies dropped by ₹5 lakh crore to ₹397.85 lakh crore.

In the BSE Sensex pack, 23 out of 30 stocks ended in red zone, led by HCL Tech, Zomato, TCS, Infosys and Tech Mahindra. Reliance Industries (RIL), the most valued stock, ended 1%. On the other hand, M&M, Kotak Mahindra Bank, Maruti Suzuki India, Nestle India, ITC, HUL, and Axis Bank settled in positive terrain with modest gain.

On the sectoral front, barring, pharma, FMCG and auto, all sectoral indices closed in the red. The BSE IT index was the top laggard with 2.6% loss, followed by BSE Metal slipped 2.2%.

IT heavyweights dented sentiments

The weakness in equity market was largest due to sharp sell-off in IT stocks, especially large-cap stocks, with Infosys, HCL Tech, TCS, Tech Mahindra falling between 3-4%. The IT sector witnessed broad-based selling, tracking sharp decline in tech-heavy Nasdaq Composite on Friday, as investors remained concerns about slowing economy and sticky inflation.

The Nasdaq Composite ended 2% lower on Friday after U.S. economic reports showed February consumer sentiment dropped to a 15-month low and Jan existing home sales fell more than expected.

Overall, the IT sector, a key market driver, is witnessing weaker deal momentum and cautious client spending amid slower global economic growth, supply chain disruptions, and pricing pressures.

FIIs’ ‘Sell India, Buy China’ strategy

Foreign Institutional Investors (FIIs) have been a key driver of India's stock market for years, but for the past six months there has been a significant foreign fund outflow from the domestic equity market. On the key reason for FIIs’ exit is the resurgence of Chinese stock market, which has emerged as a major destination of portfolio flows on hopes of higher returns.

After selling equities worth ₹81,903 crore through the exchanges in January, FIIs pulled out another ₹30,588 crore so far in February. This takes the total selling in 2025, so far, to ₹11,2492 crore, which can be attributed to higher valuations and weak corporate earnings, and slowdown in economic growth.

"Since October 2024, India's market cap has fallen by about $1 trillion, while China's has risen by $2 trillion. This suggests a tactical shift in FII flows,” says Vaibhav Porwal, Co-Founder, Dezerv.

After a prolonged correction, Chinese equities have become attractively valued after the Chinese president’s announced economic stimulus package in September 2024, which included policy support, regulatory easing, and measures to boost FII sentiment. These measures have renewed investor confidence in China's recovery narrative.

Earnings slowdown

Amid persistent concerns about high valuations and muted corporate profitability, market participants are investing with caution in 2025. “Corporate profitability is under strain, with Nifty50’s FY25 earnings growth projected at just 5% YoY, a sharp drop from the 20%+ CAGR recorded between FY20-24. This slowdown reflects broader economic challenges, including inflationary pressures, high interest rates, and cautious consumer spending, all of which have dampened corporate earnings momentum,” Motilal Oswal said in a note.

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