Indian equities forecast February 2026 is dominated by bearish sentiment after the government’s budget-driven derivatives tax hike triggered a 1.96% Nifty 50 plunge. The special Sunday trading session on February 1 saw the worst budget-day performance in six years, with the Sensex dropping 1.88% as liquidity concerns spooked investors.
Indian Equities Forecast February 2026 – Market Overview
Indian markets opened February with a historic selloff, with the Nifty 50 closing at 21,650 (-1.96%) and Sensex at 71,200 (-1.88%). This compares to last week’s close of 22,100 (-2.04% weekly decline) and sits 4.2% below January’s high of 22,600. Trading volume surged to ₹1.2 trillion during the special session, 35% above the 30-day average.
The derivatives-heavy financial sector led declines, with Nifty Bank falling 2.3%. Mid-caps and small-caps saw amplified selling, down 2.8% and 3.1% respectively. Market breadth was decisively negative at 1:4 advance-decline ratio.
This relates to our previous report on AUD/USD Forecast February 2026: Critical Bullish Rally Ahead.
Three key technical developments emerged: 1) Breakdown below the 50-day moving average (21,900), 2) RSI plunging to 38 from overbought territory, and 3) MACD crossing into bearish territory. The Nifty has now given up all January gains in a single session.
Fundamental Analysis and Key Drivers
The Bloomberg reports securities transaction tax (STT) hike stands as the primary catalyst, increasing futures trading costs by 150% (0.02% to 0.05%) and options premiums by 50% (0.10% to 0.15%). This comes amid persistent foreign outflows totaling $2.1 billion year-to-date. As Reuters reports.
The budget’s lack of foreign investor incentives compounds pressure, with Reuters analysis showing FII ownership at 18.2% of market cap – near decade lows. Domestic institutions provided ₹152 billion of support in January, but may struggle to offset derivative market shrinkage.
Traders may also want to review USD/CNY Forecast Today: 7.0000 Critical Bearish Breakout Alert.
Upcoming RBI policy on February 8 gains importance, with markets pricing 65% chance of status quo. Global risk sentiment remains fragile as Fed funds futures show just 25bps of 2026 easing priced in.
Indian Equities Technical Analysis Today
The Nifty 50 broke critical support at 21,800 (January low) with next floors at: 1) 21,500 (200-day MA), 2) 21,200 (December swing low), and 3) 20,800 (October base). Resistance now clusters at 21,900-22,000 (broken support).
RSI at 38 leaves room for further downside before oversold conditions develop. MACD histogram turned negative for the first time since November, signaling momentum shift. Options data shows put writers fleeing the 21,500 strike.
Trading Outlook and Price Prediction
Bearish momentum likely persists toward 21,500 support initially. A breakdown could accelerate toward 21,200. Any relief rally faces stiff resistance at 21,900.
Key risk events: 1) RBI policy (February 8), 2) US NFP (February 7), 3) India CPI (February 12). Sustained trade above 22,100 would invalidate bearish structure.
