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Indian markets struggled for direction and ended lower on Tuesday, as markets see-sawed between optimism that the Reserve Bank of India will pause rate hikes after Wednesday, and worries that the Fed was likely to keep upping rates for longer. Today, the markets are likely to positive start with the street awaiting the Reserve Bank of India's (RBI) policy outcome. The Reserve Bank of India (RBI) is widely expected to raise rates by a modest 25 basis points following a gradual decline in the CPI imprint for November and December to below 6 per cent. However, there may be some cautiousness as Foreign institutional investors (FII) sold shares worth Rs 2,559.96 crore on February 7, as per provisional data available on the NSE. Besides, Markets regulator SEBI has proposed an institutional mechanism that will require stock brokers to put in place systems for detection and prevention of market abuse. Cement industry stocks will be in focus as Finance Minister Nirmala Sitharaman indicated that the government could be open to considering a reduction in the goods and services tax (GST) on cement, a long-standing demand of the infrastructure sector, if the GST Council agrees. There will be some buzz in the banking sector stocks as rating agency Fitch said Indian banks’ exposure to the Adani Group is not that large to present substantial risk to their standalone credit profiles. There will be some reaction in stocks related to EV as automobiles body FADA stated that electric passenger vehicles retail sales declined by 10.51 per cent sequentially to 3,346 units in January 2023 over 3,739 vehicles sold in December last year. Meanwhile, traders will be looking ahead to the earnings for more cues including Shree Cement, Adani Power, Adani Wilmar, Escorts Kubota, Equitas Small Finance Bank, GATI, Gujarat Pipavav Port, HG Infra Engineering, IRCON International, Minda Corporation, Oberoi Realty, Piramal Enterprises, Speciality Restaurants and Trent to report their results later in the day.

The US ended higher on Tuesday as investors digested comments from Federal Reserve Chair Jerome Powell about how long the central bank might need to tame inflation. Asian markets are trading mixed on Wednesday, as Federal Reserve Chairman Jerome Powell overnight acknowledged that inflation is declining - a sign the central bank may soon pause its rate hikes.

Back home, Indian equity markets ended in red for the second day in a row on Tuesday due to selling in Metal, Telecom and Utilities shares amid rising concerns over interest rate hikes by central banks. Markets made a slightly positive start as traders took some support with NITI Aayog CEO Parameswaran Iyer’s statement that India's production-linked incentive (PLI) scheme has attracted investment worth over Rs 45,000 crore and has also created three lakh jobs. The Indian government launched the PLI scheme in 2020. Some support also came in on report that India and the European Union (EU) announced the formation of three working groups under the Trade and Technology Council that was set up to deepen strategic ties with the trade bloc.  However, key indices soon slipped into red in morning deals, as traders turned cautious with data available with the BSE showing that foreign portfolio investors were net sellers on Monday, offloading shares worth Rs 1,218.14 crore. Some concern also came amid a private report stating that India's weightage in MSCI's emerging-market benchmark has dropped after the brutal sell-off in Adani Group's stocks. India has been replaced in the second spot by Taiwan after a rally in the latter's market. Markets extended fall in afternoon deals, as sentiments remained down-beat with global rating agency Fitch Ratings’ report stating that banks will face margin pressure next fiscal (FY24) as they increase the deposit rates to attract funds to support sustained high loan growth. It expects the domestic banking sector's average Net Interest Margins (NIMs) to slightly contract by about 10 basis points (bps) in FY24 to 3.45 per cent, following a 15 bps increase in FY23 to 3.55 per cent, in a base case scenario, but remain well above that during FY17-FY22 average of 3.1 per cent. But, markets managed to trim some losses towards the end of the session, taking support from S&P Global Ratings’ statement that core inflation in India has been declining sequentially, and an elevated 6.25 per cent policy rate limits the need for further rate hikes. Finally, the BSE Sensex fell 220.86 points or 0.37% to 60,286.04 and the CNX Nifty was down by 43.10 points or 0.24% to 17,721.50.

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