Indian markets ended lower on February 21, dragged down by auto stocks as reports indicated Tesla's entry into India with its first EV shipment. The Sensex fell 425 points or 0.56 percent to 75,311.06, while the Nifty declined 117.25 points or 0.51 percent to 22,795.90.

Market sentiment was further impacted by reports suggesting that the government may ease EV import rules, potentially intensifying competition for domestic automakers. Mahindra & Mahindra shares saw their biggest single-day drop in nearly seven months, closing at Rs 2,653. Tata Motors slipped 2 percent to Rs 676, while Hyundai Motor India fell 2.5 percent to Rs 1,875.

The domestic market continued to exhibit broad-based weakness, primarily influenced by investor concerns over the hawkish tone of the FOMC minutes, which signalled prolonged higher interest rates that could constrain liquidity in EMs. Although the market has undergone a healthy correction, the uncertainties surrounding the gradual recovery of corporate earnings and ongoing tariff-related risks continue to cast doubt on valuation levels, particularly in the broader market. India is currently lagging behind its Asian peers, as FII outflows remain high, with the "sell India, buy China" strategy continuing to yield returns for the time being.

A Combination of negative factors such as relentless FII selling, falling rupee, expensive valuations and the US threat of reciprocating tariff levies continue to drive investors away from Indian equities. In fact, local benchmarks under-performed both Asian and European indices, which logged significant gains. Barring metals, the slump in domestic markets was led by weakness in banking, IT, telecom, auto, realty and oil & gas shares.

The Nifty Auto index bore the brunt of the sell-off, tanking 2.5 percent following reports that the government may slash import duties on electric vehicles from 110 percent to 15 percent as part of a new EV policy, paving the way for Tesla’s entry into India.

Foreign institutional investors (FIIs) have offloaded Indian equities worth Rs 33,527 crore so far this month, as renewed interest in rebounding Chinese stocks prompts a shift in global allocations.

The broader market mirrored the weakness, with the BSE Midcap index slipping over 1 percent and the BSE Smallcap index down 0.4 percent. Midcap and smallcap stocks have now corrected 16 percent and 20 percent, respectively, from their record highs, as investors grow wary of stretched valuations and lacklustre earnings.

Financials and IT stocks also came under pressure, falling close to 1 percent as persistent foreign investor selling weighed on sentiment. Midcap IT stocks such as Coforge and Persistent Systems slumped 2-3 percent after global peer Endava slashed its revenue growth guidance for FY25 to 8.5-9 percent from the earlier projection of 10-11.5 percent.

On the Nifty 50, Adani Ports, BPCL, Tata Motors, Wipro, and M&M were the biggest laggards, dropping 2-6 percent. Meanwhile, HCLTech, Eicher Motors, L&T, Tata Steel, and Hindalco defied the broader market trend, gaining 1-2 percent.

Shares of JSW Energy climbed 6 percent, extending their winning streak to a fourth consecutive session after global brokerage Morgan Stanley reaffirmed its ‘overweight’ rating on the stock with a price target of Rs 545. The target implies a potential upside of 16.5 percent from the last close of Rs 468.

Shares of Religare Enterprises surged 18 percent after the Burman family secured majority control of the company and was officially designated as its promoter.

L&T Technology Services soared 4 percent after global brokerage firm Macquarie upgraded the IT stock to ‘Outperform’ from ‘Underperform,’ citing improved valuation and potential growth catalysts. The brokerage raised its target price to Rs 6,530 per share, implying a 33 percent upside from previous closing levels.