Key Takeaways
- Heavyweight stocks like ITC, Kotak Mahindra and ICICI Bank powered a 0.32% Sensex rally.
- US‑India tariff cut to 18% unlocked a fresh wave of short‑covering and call buying.
- Technical screens show Nifty perched in an oversold zone with strong call open interest at 26,000‑26,500.
- Bank Nifty’s next hurdle is 60,500; staying above 58,000 keeps the bullish bias intact.
- Selective accumulation in real‑estate (Oberoi), financials (Canara) and diversified conglomerates (Trent) offers upside with tight stops.
The Hook
You missed the tariff‑driven bounce—now the market is rewarding the few who acted fast.
Why the Sensex and Nifty 50 Are Riding a Tariff‑Driven Surge
The joint US statement reducing the “reciprocal” tariff on Indian goods from 25% to 18% was the catalyst that turned a tentative market into a short‑covering frenzy. When the tariff relief took effect on February 7, investors rushed to unwind bearish bets, driving the Sensex up 266 points (0.32%) and the Nifty 50 up 51 points (0.20%). Short covering—a rapid buying of previously borrowed shares—creates a self‑reinforcing upward pressure, especially in high‑beta stocks that dominate the indices.
Beyond the immediate lift, the tariff cut improves profit margins for exporters and reduces input costs for import‑heavy manufacturers, reinforcing a macro‑positive backdrop that dovetails with India’s growth‑focused Union Budget and fresh trade pacts with the EU and the United States.
Sector Pulse: Banking, IT and Real Estate Under the Spotlight
Banking giants Kotak Mahindra Bank and ICICI Bank led the rally, reflecting two converging forces: better credit‑cost outlooks from a lower‑inflation environment and a renewed appetite for risk assets among foreign institutional investors (FIIs). The broader banking sector, however, remains sensitive to global rate shifts. Watch peer Tata Finance and Adani Power for early signs of sector‑wide strength or weakness.
ITC’s resilience stems from its diversified revenue mix—cigarettes, FMCG, hotels and data‑center services—making it a defensive anchor when earnings volatility spikes. The company’s recent cost‑saving initiatives should translate into higher EBITDA margins, a trend mirrored across the IT services space, where Tata Consultancy Services and Infosys continue to benefit from offshore demand.
Real‑estate remains a contrarian play. Oberoi Realty’s price target of ₹1,680 reflects expectations of a supply‑tight premium in premium office spaces, especially as multinational firms expand in Tier‑I cities under the new trade agreements.
Competitor Landscape: How Tata, Adani and Peer Groups Are Positioning
Tata Group’s conglomerate structure provides a built‑in hedge; while its steel arm faces raw‑material price pressure, Tata Consultancy Services is likely to capture export growth from the tariff easing. Adani’s logistics and energy verticals stand to gain from lower freight costs, yet their exposure to commodity price swings adds a layer of risk. Investors should compare the price‑to‑earnings (P/E) multiples of these peers against the heavyweights that led the rally to gauge relative value.
For example, Tata Consumer Products trades at a forward P/E of 22x versus ICICI Bank’s 13x, suggesting that the bank is priced more conservatively relative to earnings growth expectations. Such spreads highlight opportunities for sector rotation when macro cues tilt in favor of financials.
Historical Lens: Past US‑India Tariff Moves and Market Reactions
In 2019, the US reduced tariffs on selected Indian textiles, and the Sensex rallied 1.1% over a week, driven largely by textile exporters and the broader export‑oriented index components. The pattern repeated after the 2022 ITC‑US tariff talks, where a 2‑point tariff cut sparked a 0.5% surge in the Nifty 50. History shows that every incremental reduction tends to trigger a short‑covering wave, especially when the market expects a series of progressive cuts.
Crucially, the upside is often capped if geopolitical tensions re‑escalate, as seen after the 2020 US‑China trade escalations. Therefore, while the current 7‑point reduction is sizeable, investors should keep an eye on diplomatic developments that could re‑introduce volatility.
Technical Toolbox: Decoding Put‑Call Ratio, Short Covering and Open Interest
The Put‑Call Ratio (PCR) at 0.75 indicates that for every 75 put contracts there are 100 call contracts, a classic sign of limited downside and a bullish sentiment among options traders. An oversold Nifty, as identified by the 14‑day Relative Strength Index (RSI) slipping below 30, further supports the case for a bounce.
Open interest (OI) data reveal heavy call OI at the 26,000‑26,500 strikes, forming a resistance band, while put OI clusters around 25,000‑25,500 provide a firm support base. A sustained breach above 25,600‑25,800 could unlock the 26,000‑26,300 target zone within weeks, provided no adverse global shock.
Bank Nifty’s OI shows a concentration of futures contracts at the 60,000 strike, making that level a psychological pivot. Holding above the 58,000 support is essential to preserve the current bullish bias.
Investor Playbook: Bull vs Bear Cases
Bull Case
- Tariff relief deepens, prompting a second round of short covering across heavyweights.
- FIIs rotate back into Indian equities, bolstering demand for banking and IT stocks.
- Technical indicators break key resistance (Nifty > 25,800, Bank Nifty > 60,500), confirming a medium‑term uptrend.
- Selective accumulation in Trent, Oberoi Realty and Canara Bank yields 5‑10% upside with tight stop‑losses.
Bear Case
- Geopolitical flashpoints reignite risk aversion, triggering fresh outflows and renewed short‑selling pressure.
- Quarterly earnings miss across the banking sector erodes confidence, pushing Nifty below the 25,300 support.
- Open interest reverses, with put OI overwhelming calls, driving PCR above 1.2.
- Macro data (inflation, PMI) stalls, limiting the budget‑driven growth narrative.
In a range‑bound environment, the prudent strategy is “buy on dips” for the highlighted stocks, while monitoring the 25,600‑25,800 Nifty corridor and the 58,000‑60,500 Bank Nifty band for decisive directional cues.