Indian Stock Market Deep Dive: Trade Deal Triumph, IT Sector Tremors, and the NSE IPO Awakening

Introduction

The Indian stock market navigated a week of dramatic contrasts in early February 2026, marked by landmark policy breakthroughs, sector-specific disruptions, and corporate earnings surprises that paint a nuanced picture of Asia's third-largest economy. On Friday, February 6, 2026, the Sensex closed at 83,580.40, up 266 points (0.32%), while the Nifty 50 gained 50.90 points (0.2%) to settle at 25,693.70. This recovery was primarily led by FMCG stocks rallying 2.27% as investors sought defensive positions amid broader volatility.

For retail investors, the landscape is currently defined by two powerful, opposing forces: a historic India-US interim trade deal that has unlocked $30 trillion in market access, and a massive $22.5 billion rout in the IT sector triggered by fears of Generative AI disruption. Simultaneously, the National Stock Exchange (NSE) has finally cleared the path for its long-awaited IPO, signaling a new era of institutional maturity in India's capital market infrastructure. This comprehensive analysis synthesizes these critical developments to provide a clear roadmap for the months ahead.

1. The India-US Trade Reset: A $30 Trillion Opportunity Unlocks

On Saturday, February 7, 2026, India and the United States announced a framework for an interim trade agreement that represents one of the most consequential bilateral economic resets in recent history. The centerpiece of this deal is the reduction of US reciprocal tariffs on Indian goods from a punitive 50% (imposed in August 2025) to a more manageable 18%.

The Deal Architecture

Historically, trade friction had escalated in 2025, but this new agreement addresses several geopolitical pressure points. Specifically, the US has revoked a separate 25% tariff that was previously linked to India's continued purchases of Russian crude oil.

Key Terms of the Agreement:

• Effective Tariff Reduction: A drop from 50% to 18% on approximately 55% of Indian exports to the US.
• Market Access: Unlocks pathways to a combined $30 trillion economic bloc.
• Indian Commitments: A $500 billion procurement of US energy products, aircraft, technology (including GPUs and semiconductors), and coking coal.
• Agricultural Protections: India successfully excluded sensitive sectors like dairy and staple agriculture, protecting 50% of the population dependent on farming.

Economic Impact and Sectoral Winners

Bilateral trade between the two nations stood at $186 billion in FY 2024-25, with India maintaining a $41 billion trade surplus. Analysts at PwC India and GTRI project that the tariff reset will improve landed-price competitiveness by 20% to 25% for affected categories.

Data suggests that this agreement positions India as the preferred alternative manufacturing base as the "China Plus One" strategy continues to evolve. However, domestic stakeholders such as soymeal producers and apple growers may face increased competition from US imports.

2. Software-mageddon: AI Angst Erases $22.5 Billion from IT Stocks

The week of February 3-7, 2026, became a watershed moment for India's $283 billion IT services industry. Shares of giants like TCS, Infosys, Wipro, HCL Tech, and Coforge plummeted after the US-based AI startup Anthropic unveiled enterprise tools capable of automating high-level tasks like legal document review and sales analytics.

The Scale of the Selloff

The Nifty IT Index crashed by approximately 7% for the week, marking its steepest decline in four months. The total market value destruction reached a staggering $22.5 billion. Since the start of 2025, the IT index has fallen by 18%.

Single-Day Performance (Friday, Feb 6):

• TCS: Down nearly 2.1%
• Infosys: Declined 1.4%
• Coforge: Fell 3.4%
• Wipro: Under persistent pressure throughout the week

Structural Disruption vs. Overreaction

The fundamental fear is that India's labor-intensive delivery model is facing an existential threat from Generative AI. While bears argue that automation directly competes with India's cost arbitrage advantage, bulls believe the panic is a knee-jerk reaction. Leading firms are already securing large AI-led transformation deals in the BFSI and healthcare sectors. Historical trends indicate that such transitions often create a temporary vacuum before new revenue models emerge.

3. NSE's Dual Breakthrough: IPO Approval and Coal Exchange Launch

After seven years of regulatory limbo, the National Stock Exchange (NSE) cleared a massive milestone on February 6, 2026. The board approved its Initial Public Offering (IPO) via an offer-for-sale (OFS) mechanism, following a January 2026 nod from SEBI.

IPO Architecture and Financials

The IPO Committee is chaired by Tablesh Pandey (former LIC MD) and includes members like Srinivas Injeti and CEO Ashishkumar Chauhan. Major institutional shareholders, including LIC (holding 10%) and SBI (holding 7.6%), are expected to divest portions of their holdings.

NSE Q3 FY26 Financial Performance:

• Profit After Tax (PAT): Rs 24.08 billion (15% sequential increase)
• Equity Options Volumes: Up 15% quarter-on-quarter
• Consolidated Revenue: Up nearly 7% from the September quarter

India's First National Coal Trading Exchange

In a parallel move, the NSE approved a subsidiary to establish a national coal trading exchange with a capital investment of Rs 100 crore. India currently mines over 1 billion tonnes of coal annually, yet price opacity remains a challenge. The exchange aims to provide a unified electronic platform for physical coal trading.

Investors may consider monitoring coal-related stocks like Coal India, NMDC, and Gujarat Mineral Development Corporation as this exchange begins operations.

4. RBI's February Bonanza: A Regulatory Reshape for Banking and NBFCs

On February 6, 2026, the Reserve Bank of India (RBI) introduced several structural reforms that will reshape the financial landscape starting April 1, 2026.

Risk-Based Deposit Insurance

The current flat-rate system (12 paise per Rs 100 of deposits) will be replaced by risk-based pricing.

• Well-managed banks: Can receive up to a 33% reduction in premiums.
• Stress-free contributors: Eligible for an additional 25% discount.
• Weaker banks: Will face higher premiums to reflect their risk profiles.

NBFC and Credit Reforms

1. Small NBFC Exemption: Type-I NBFCs with assets under Rs 1,000 crore may be exempted from registration.
2. Gold Loan Expansion: Muthoot Finance and Manappuram Finance no longer need prior RBI approval to open branches beyond 1,000 locations.
3. MSE Loan Limits: The limit for collateral-free loans to Micro and Small Enterprises has been doubled from Rs 10 lakh to Rs 20 lakh.
4. REIT Lending: Banks are now permitted to lend to REITs, with exposure capped at 10% of the unit capital.

5. The IPO Boom: Fractal Analytics and the Rs 14,000 Crore Pipeline

The primary market is heating up with seven IPOs totaling approximately Rs 14,000 crore lined up for late February 2026.

Key Upcoming IPOs (Feb 9-11):

Fractal Analytics is particularly notable, carrying a 4% Grey Market Premium (GMP). The company serves Fortune 500 clients, and its performance will be a litmus test for AI-driven business models in India.

6. Earnings Season Winners: Steel, Jewelry, and Defense

Sectoral Outperformance in Q3 FY26

• Tata Steel: Reported a staggering 825% YoY surge in profit to Rs 2,730.37 crore. Consolidated EBITDA surged 31% to Rs 24,894 crore.
• Kalyan Jewellers: Profit jumped 90% to Rs 416.29 crore on the back of strong festive and wedding demand. Revenue rose 42% to Rs 10,343 crore.
• Solar Industries: A 38% profit jump to Rs 467 crore, driven by a massive Rs 21,200 crore order book, of which Rs 18,000 crore is for defense.
• MRF: Profit more than doubled to Rs 691.83 crore (119% growth) as tire demand rebounded.
• LIC: The insurance giant posted a 17% profit increase to Rs 12,958 crore.

Conversely, some firms struggled. Siemens saw a 26% profit decline due to labor code compliance costs, while Sula Vineyards saw profit plunge 68% due to weak consumer spending.

7. Cement Sector: Recovery Hopes Amidst Price Pressures

Q3 results for the cement sector showed a mix of turnaround stories and missed expectations.

• JSW Cement: Swung to a Rs 130.6 crore profit from a Rs 68 crore loss in the previous year.
• Shree Cement: While profit rose 38% to Rs 268 crore, it missed analyst views due to a 6% decline in pan-India prices.

Data suggests that cement pricing is beginning to stabilize, with all-India averages increasing by Rs 7 per bag in January 2026 to Rs 319. The sector is projected to grow at 7-8% for FY26, supported by the Rs 12.2 lakh crore infrastructure allocation in Budget 2026.

8. Built Environment: India's $175 Billion Infrastructure Play

At the World Economic Forum 2026 in Davos, India presented its "built environment" as a premier investment frontier. With 100 million additional people expected in urban areas by 2036, the infrastructure demand is unprecedented.

Infrastructure Catalysts:

• Digital Infrastructure: Data center capacity is expected to grow from 1.5 GW to 8 GW by 2030.
• Budget 2026: Allocated Rs 12.2 lakh crore for capital expenditure (4.4% of GDP).
• REIT Growth: New RBI rules allowing bank lending to REITs are expected to rerate stocks like Embassy Office Parks and Mindspace Business Parks.

9. Market Sentiment and Technical Positioning

Foreign vs. Domestic Flows

Foreign Portfolio Investors (FPIs) remained net sellers in January 2026, withdrawing Rs 35,962 crore. However, Domestic Institutional Investors (DIIs) continued to support the market through strong SIP inflows.

Technical Indicators and Commodities

• India VIX: Eased to 12.90 from a peak of 15.47, suggesting reduced fear.
• Indian Rupee: Appreciated slightly to 90.25 per USD.
• Gold: Rose to Rs 1,54,590 per 10 grams on global safe-haven demand.
• Crude Oil: Dipped to Rs 5,723 per barrel.

Key Takeaways

• Historic Trade Access: The reduction of US tariffs to 18% unlocks a $30 trillion market bloc, significantly boosting export-oriented sectors like Textiles and Pharma.
• IT Sector Vulnerability: The $22.5 billion loss in IT market cap highlights the disruptive power of Anthropic's new AI tools, necessitating a shift from labor arbitrage to platform-based revenue.
• Banking Resilience: The RBI's risk-based deposit insurance and increased MSE loan limits (Rs 20 lakh) strengthen the financial ecosystem and credit access.
• NSE Institutional Maturity: The NSE IPO and the launch of the National Coal Trading Exchange mark significant milestones for India’s market infrastructure.
• Earnings Momentum: Heavyweights like Tata Steel (825% profit jump) and Kalyan Jewellers (90% profit jump) demonstrate strong domestic demand and operational efficiency.

What This Means for Investors

The current market environment is a "multi-speed" one. While the macro-economic bull case is strengthened by trade deals and infrastructure spending, sectoral challenges—particularly in IT—require a selective approach. Historical trends indicate that during periods of high FPI outflows, domestic liquidity provided by SIPs acts as a crucial cushion.

Investors may consider monitoring sectors with high order book visibility, such as Defense (Solar Industries) and companies benefiting from the India-US trade reset. The maturation of the REIT market also offers a new avenue for yield-seeking investors. As always, volatility remains a feature of a market in transition, and staying focused on fundamental earnings quality is paramount.