The Indian stock market saw healthy buying interest in the morning session on Wednesday, February 25, largely due to short covering amid positive global cues.
The Sensex jumped over 700 points to an intraday high of 82,958, while the Nifty 50 reclaimed the 25,650 mark, rising by almost 1%.
The mid and small-cap indices also rose more than half a per cent each, reflecting broad-based buying in the domestic market.
The overall market capitalisation of BSE-listed firms jumped to ₹469 lakh crore from nearly ₹466 lakh crore in the previous session, making investors richer by ₹3 lakh crore in a session.
Key themes dominating the Indian stock market
The Indian stock market has been witnessing sharp volatility this year. Volatility index, India VIX, has surged nearly 40% this year so far, indicating heightened nervousness among market participants.
The 9–12 range is considered the lower band of the India VIX, while the normal range for the fear gauge is around 12-15. This is the range in which the market has enough triggers to move either up or down, though not necessarily with extreme volatility.
Among key themes are the volatility in the IT sector and FII buying in the cash segment.
“There are two significant trends in the market – one negative, the other positive – which will have a bearing on how the market moves in the near-term. The negative factor is the continued weakness in IT stocks triggered by the Anthropic shock. The positive factor is the FIIs turning buyers in February after a long time,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, noted.
Let’s take a look at the five key themes in detail:
Let’s take a look at five key factors that dominate the domestic market
1. The narrative surrounding AI’s impact on IT
Noise surrounding how AI will impact the IT sector is keeping market participants busy. Global tech stocks have been experiencing sharp volatility of late amid the narrative that AI will significantly disrupt IT services.
The Nifty IT index, after crashing 5% in the previous session, jumped 3% in morning trade on Wednesday after a recovery in the US tech stocks after Anthropic announced partnerships with several SaaS companies, including Salesforce, signalling the AI company will work alongside software providers rather than disrupt or replace them.
Tech-heavy index Nasdaq jumped more than 1% on Tuesday. IBM‘s stock price, which saw the biggest single-day fall since October 2000 on Monday, rose more than 5% on Tuesday.
“Many leading IT names have crashed between 18%-26% in the last month alone. Sustained selling in IT stocks may be over, and there is a possibility of some rebound in the segment. News of Anthropic’s Claude chatbot building partnerships in software and services with IT firms indicates that there will be collaboration opportunities for Indian IT firms,” said Vijayakumar.
2. US tariffs
The reduction in US tariffs on imports has comforted markets. But uncertainty over the US tariff trajectory is a key factor behind the market’s sharp swings of late.
After the US Supreme Court’s ruling on Trump’s tariffs, Washington has begun collecting the newly imposed 10% tariffs on all imports. However, the US administration is working to raise duties to 15%, Reuters reported. This has raised concerns that the tariff saga is not over and the US President may keep pursuing his aggressive tariff strategy.
3. Geopolitics: US-Iran tensions
Easing signs of tension between the US and Iran seem to have influenced market sentiment positively. The US and Iran are all set to hold the third round of nuclear talks in Geneva on Thursday, February 27.
Trump, in his State of the Union address on Tuesday, said that he wants to resolve the issue with Iran diplomatically. However, he also termed Iran as “the world’s no. 1 sponsor of terrorism”, according to Hindustan Times.
“Geopolitical developments — including US–Iran tensions — remain among key factors. However, markets appear to have largely internalised such risks. Since the Russia–Ukraine conflict began, global uncertainties have become somewhat embedded in market expectations,” Ajit Mishra, SVP of Research at Religare Broking, noted.
The key variable is crude oil. According to Mishra, if crude rises sharply and sustains above $75, that could become a concern for the market.
4. Foreign capital flow
After selling Indian stocks for 7 consecutive months, foreign institutional investors (FIIs) turned buyers in the cash segment in February. As of the previous session, FIIs have bought Indian stocks worth ₹1,370 crore in the cash segment this month.
“FIIs are turning buyers in February after a long time. If the weakness in IT stocks subsides and the segment recovers, the tailwind of FII buying can lift the markets. Importantly, FII buying has fundamental support from a strong economy and rising corporate earnings. Segments witnessing FII buying like financials, capital goods and pharmaceuticals are likely to remain resilient,” said Vijayakumar.
5. Sector-specific buying
Experts highlight that one key factor behind the market’s recovery on dips is an improved outlook for major sectors, including banking, autos, metals, and energy.
“Sectors with a consistent underlying trend — metals, auto, banking, and energy — are holding up well irrespective of broader market weakness. Buying interest is visible in these sectors, while IT, FMCG, and realty remain under pressure,” noted Mishra.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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