Opening Bell - Morning Commentary

RBI Circular on Capital Market Exposures to Impact Liquidity in Derivative Markets

The US stock market's recent moves can be characterised by a shift from cautious optimism to a sharp mid-week sell-off, which was ultimately stabilised by a cooling inflation report. Last week began with the Dow Jones Industrial Average and S&P 500 hovering around key psychological levels (50,000 and 7,000, respectively). However, sentiment soured from Thursday, February 12, as the market aggressively "punished" the software sector.

The Indian market was a tale of two halves over the last fortnight - an initial rally driven by a historic trade agreement, followed by a sharp correction triggered by sticky inflation and global tech jitters. The US-India landmark deal initially boosted export-oriented sectors such as textiles and auto components.

The Nifty IT index has declined by more than 14% in 2026, and the sector has shed over ₹1.56 lakh crore in market value in recent weeks.

The RBI's new circular tightens banks' capital market exposures, banning intraday margin funding to brokers (limited to secured settlement gaps) and requiring 100% cash backing for bank guarantees in proprietary trading.

The circular will raise costs for brokers and prop desks, curbing leverage and liquidity in derivatives, where prop trading drives 40% of F&O turnover.

The Nifty index fell on Friday, plunging 336 points, or 1.3%, to close at 25,471. Nifty violated its crucial support levels of the 20 and 50-day EMAs. The next support lies at the lower band of the gap formed on February 3, 2026 (25,108), though the 200-day EMA at 25,215 may provide interim support.

Market breadth deteriorated sharply, underscoring ongoing profit-booking in midcaps and smallcaps.

Indian markets are poised to open lower on cautious local cues.