Indian Stock Market Deep Dive: February 17, 2026

Introduction

On Tuesday, February 17, 2026, the Indian equity markets demonstrated a portrait of transition. Investors found themselves navigating a complex landscape defined by regulatory recalibration, a technological renaissance in the IT sector, and the early signs of a broader earnings recovery. The Sensex closed 173.81 points higher at 83,450.96 (+0.21%), while the Nifty 50 added 42.65 points to settle at 25,725.40 (+0.17%).

While the headline gains were modest, the underlying market activity was anything but quiet. The trading session was characterized by three primary narratives: the Reserve Bank of India's (RBI) stringent new lending norms impacting brokerages, a landmark AI partnership between Infosys and Anthropic, and the State Bank of India (SBI) ascending to become India's fourth-most valuable company. This article provides a comprehensive breakdown of these shifts and what they mean for the retail investor.

I. The Regulatory Earthquake: RBI's Collateral Mandate

The most significant development this week was a regulatory shift from the Reserve Bank of India. On February 13, the RBI issued a circular mandating 100% secured funding for capital market intermediaries, effective April 1, 2026. This move has triggered a structural reset for the brokerage and exchange ecosystem.

The New Paradigm: Secured Funding and Cash Margins

Under the new framework, the rules for leveraging capital have tightened significantly:

• Bank Guarantees: Now require 50% collateral, with a minimum of 25% in cash.
• Margin Trading Facilities (MTF): Banks must now mandate a 50% cash margin for these products, which have historically fueled retail trading growth.
• Equity Haircuts: A mandatory 40% haircut is imposed on equity shares accepted as collateral.
• Proprietary Trading: Banks are explicitly prohibited from funding proprietary trading activities except under specific, limited circumstances.

Market Impact on Intermediaries

The reaction in the stock prices of exchanges and brokerages was immediate and severe:

Proprietary traders, who account for roughly 50% of equity options premium turnover and 30% of cash market turnover, are expected to face the highest cost increases. Jefferies suggests that for BSE, these norms could affect 10-12% of options turnover, potentially leading to a 10% impact on earnings.

II. The AI Awakening: Infosys and Anthropic Partnership

While regulation pressured brokerages, the IT sector found a lifeline through technological innovation. Infosys announced a strategic partnership with Anthropic on February 17, sparking a 3% rally in its share price and helping the Nifty IT index climb 2%.

Architecture of the Collaboration

This partnership integrates Anthropic's Claude models—including the specialized Claude Code—with the Infosys Topaz AI platform. Key features include:

• Center of Excellence: A dedicated hub focused initially on the telecommunications sector.
• Domain Expertise: Utilizing Infosys's workforce of 330,000+ employees to apply AI in regulated industries like finance and manufacturing.
• Agentic AI: Developing solutions for multi-step tasks such as processing insurance claims and automating compliance reviews.

This move follows a period of intense skepticism for the IT sector, which had seen ₹5.7 lakh crore in market cap vanish earlier in the year following disruptions from AI models like DeepSeek. Analysts at Cholamandalam Securities have called this a "big game changer," though Motilal Oswal warns that ongoing disruptions remain a "key monitorable."

III. The Banking Renaissance: SBI’s ₹11 Lakh Crore Milestone

State Bank of India (SBI) has officially surpassed Tata Consultancy Services (TCS) to become India’s fourth-most valuable company. Its market capitalization now exceeds ₹11 lakh crore, trailing only Reliance Industries, HDFC Bank, and Bharti Airtel.

SBI Fundamentals and Valuation

SBI's rally of 70% over the past year is supported by robust financial metrics:

• Q3 Net Profit: Grew 24% YoY to ₹21,028 crore.
• Net Interest Income: Increased 9% to ₹45,190 crore.
• Gross NPA: Fallen to a historic low of 1.57%.
• ROE/ROA: Return on Equity stands at 16-17%, with Return on Assets exceeding 1%.

While SBI trades at a Price-to-Book (P/B) multiple of 2.41 (up from 1.35 a year ago), it remains slightly cheaper than private peers like ICICI Bank (2.92) and HDFC Bank (2.69). However, analysts suggest that future gains will likely come from earnings delivery rather than further multiple expansion.

IV. Macroeconomic Crosscurrents: Trade and Deficits

Macroeconomic data released on February 17 painted a challenging picture for India's trade balance. The merchandise trade deficit widened to $34.68 billion in January 2026, the highest in three months.

The Gold Import Factor

A massive 359% surge in gold imports (totaling $12.07 billion) was the primary driver of the deficit. This reflects both wedding season demand and a flight to safety among investors.

Export Performance Snapshot:

• Services Exports: A bright spot, expanding 26.33% to $43.90 billion.
• US Exports: Fell 21.7% to $6.60 billion due to high tariffs.
• Engineering Exports: Grew 10.37% to $10.40 billion.
• Electronics: Growth flattened to just 0.32% in January.

On the diplomatic front, the implementation of the India-US trade deal has reduced tariffs on Indian goods from 25% to 18%, providing much-needed relief for exporters.

V. The Capital Formation Boom: 25 Crore Trading Accounts

The democratization of Indian finance reached a watershed moment as unique trading accounts on the NSE surpassed 25 crore (250 million). Remarkably, 1 crore accounts were added in the last two months alone.

Regional Distribution of Trading Accounts

The SIP Revolution continues to be the bedrock of retail participation, with average monthly inflows reaching ₹28,766 crore.

VI. Earnings Recovery and the Labour Code Shock

While Nifty 50 profit growth accelerated to 7.5% YoY in Q3 FY26, the numbers were dampened by the implementation of new labour codes in November 2025. These codes mandate that basic salaries must account for at least 50% of CTC, leading to higher gratuity liabilities.

Impact on NBFCs (One-Time Provisions)

The top 10 NBFCs collectively booked nearly ₹900 crore in provisions due to these changes:

VII. Sector Snapshots: Winners and Losers

• Defence: Cochin Shipyard emerged as the L1 bidder for a ₹5,000 crore Navy contract. The stock rallied 5.69%, supported by a total order book of ₹21,100 crore.
• Pharmaceuticals: Eli Lilly announced a $1 billion investment to make India a global hub for its supply chain, particularly for the weight-loss drug Mounjaro.
• Renewable Energy: The solar sector is facing a glut, with domestic capacity now triple the actual demand due to a 13-fold jump in capacity since 2020.
• Electric Vehicles: Legacy players (TVS, Bajaj, Hero) now control 60% of the electric two-wheeler market, up from 34% in 2023, as startups like Ola Electric lose ground.

VIII. The IPO Pipeline

Two significant public offerings are on the horizon for late February:

1. Gaudium IVF & Women Health (Feb 20-24): A ₹165 crore issue, marking the first fertility care IPO in India.
2. Clean Max Enviro (Feb 23-25): A Brookfield-backed renewable energy IPO seeking to raise ₹3,100 crore.

IX. FPI Reversal and Currency Pressures

After three months of selling, Foreign Portfolio Investors (FPIs) returned as net buyers, injecting ₹19,675 crore in the first half of February. However, volatility persists, evidenced by a ₹7,395 crore sell-off on February 13.

The Indian Rupee remains under pressure, trading at 90.76 per dollar. Analysts are closely watching the 91.00 level, with the RBI likely intervening through state-run banks to prevent a sharp breach.

Key Takeaways

• Regulatory Reset: The RBI’s collateral mandate is a "structural reset" for brokerages; proprietary traders face higher costs and potential liquidity crunches.
• AI Integration: Infosys’s deal with Anthropic suggests that IT majors are moving from defensive to offensive strategies regarding AI disruption.
• PSU Bank Dominance: SBI’s ascent to the Top 4 highlights the massive rerating of state-owned banks, though valuation gaps with private peers are narrowing.
• Retail Conviction: 25 crore trading accounts and record SIP inflows of ₹28,766 crore show that the retail investor is now a structural pillar of the Indian market.
• Labour Code Impact: Investors should look at "adjusted" earnings for Q3, as the 5% hit to aggregate profits was a one-time accounting adjustment for many firms.

What This Means for Investors

Data suggests that the Indian market is entering a "maturation phase." While the long-term structural story remains intact, return expectations must be tempered. The transition from multiple expansion (stocks getting expensive) to earnings-driven growth (stocks growing because profits grow) is healthy but often volatile.

Investors may consider monitoring the liquidity in the derivatives segment following the April 1 implementation of RBI norms. Furthermore, the shift in the EV market toward legacy manufacturers suggests that "brand reliability" and "service networks" are becoming more important than early-mover startup advantages. As always, building positions during market corrections remains a more prudent strategy than chasing momentum in overvalued sectors.