Equities End Flat, Rupee Slips as US Trade Uncertainty Weighs on Sentiment

HIGHLIGHTS

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Indian equity benchmarks ended Monday’s session on a flat note, with the Nifty 50 hovering near the 25,450 mark as investors turned cautious ahead of the anticipated announcement of a US-India trade agreement later in the day. The broader market remained in consolidation, reflecting a lack of conviction amid mixed global cues and selective sectoral moves.

While gains in FMCG heavyweights and index major Reliance Industries provided some support to the benchmark indices, selling pressure in midcaps, select energy counters, and financials kept overall sentiment restrained. Market participants largely opted for a wait-and-watch approach ahead of the trade deal announcement, which sources suggest may cover customs-related measures immediately, with other components to follow.

Sectoral Performance
Sectorally, the Nifty FMCG index rose 1.6%, driven by strength in Hindustan Unilever, Tata Consumer Products, and Nestle India, reflecting defensive buying in a cautious environment. The oil & gas index also posted marginal gains, up 0.4%. On the flip side, the media index fell 1%, while IT and metals declined 0.7% each, tracking global sector trends and soft risk appetite.

Among key losers, Tech Mahindra, Bharat Electronics, UltraTech Cement, and ONGC weighed on the index. In contrast, Jio Financial, Eicher Motors, and select auto names edged higher but were unable to offset broader weakness.

Top Gainers	% Change	Top Losers	% Change
NIFTY FMCG	1.68%	NIFTY MEDIA	-1.03%
NIFTY OIL & GAS	0.41%	NIFTY IT	-0.76%
NIFTY REALTY	0.08%	NIFTY METAL	-0.61%
NIFTY HEALTHCARE INDEX	0.02%	NIFTY CONSUMER DURABLES	-0.24%
		NIFTY PSU BANK	-0.16%

Indian government bonds ended largely unchanged on Monday as traders shrugged off rupee weakness and focused on abundant domestic liquidity and global cues. The benchmark 10-year bond yield settled at 6.2933%, nearly flat from the previous close of 6.2947%. The five-year 6.75% 2029 bond yield was at 6.06%, while the weighted average call money rate hovered at 5.27%.

Bond markets remained steady despite intraday volatility in the rupee, which briefly fell to 86.0275 against the US dollar before recovering to close at 85.85. Traders remained largely focused on external cues, particularly movement in US Treasury yields and the evolving stance on global trade.

The 10-year US Treasury yield stood at 4.35% during Asian hours, and any significant move from this level may influence Indian debt markets. Investor attention was also on potential tariff developments after US President Donald Trump signaled the imposition of a 10% tariff on countries aligning with BRICS, whose summit began in Brazil on Sunday.

Despite these uncertainties, domestic sentiment was underpinned by strong systemic liquidity. India’s banking system liquidity surplus expanded sharply to an average of ₹3.3 trillion last week, the highest since June 2022, buoyed by a pick-up in government spending.

Tenure	Today	Previous
10-year Gilt	6.29%	6.29%
5-year gilt	5.95%	5.95%
5-year OIS	5.68%	5.68%

The Indian rupee weakened sharply on Monday, closing at 85.85 against the US dollar, down 0.5%—its worst single-day decline since mid-June. The fall was triggered by renewed uncertainty over US tariff policy after President Donald Trump threatened a fresh 10% levy on BRICS nations. The rupee had earlier touched an intraday low of 86.0275 before paring some losses.

Trump’s remarks, posted on social media, outlined a new trade stance targeting countries perceived as aligning with "anti-American" BRICS policies. While the comments lacked specifics, the timing rattled market sentiment, especially as trade negotiations with India and other BRICS nations remain inconclusive.

The rupee’s decline tracked broader weakness across emerging market currencies. The South African rand dropped 1%, and the offshore Chinese yuan slid 0.2%, while Asian equities also fell. US equity futures indicated a negative opening following the long weekend, adding to the risk-off tone.

Market participants said stop-loss triggers below 85.80 further accelerated the rupee's slide. Dollar demand from a major private sector bank also added intraday pressure. With no visible progress on trade talks over the weekend, the rupee came under added stress amid global uncertainty.

Unit	Today	Previous
Dollar/Rupee	85.85	85.39
Dollar Index	96.95	96.58
1-year Dollar/rupee premium (%)	1.99%	2.02%

OUTLOOK
Indian equities may face near-term resistance amid mixed global cues and the absence of a confirmed US-India trade deal. Benchmark indices could remain rangebound, with the Nifty 50 likely oscillating between 25,300 and 25,600. While FMCG and select large-cap stocks may continue to support the index, profit-booking could persist in midcaps and financials. Technology stocks might attract some interest following a rebound last week, but the broader market tone may remain defensive unless there is clarity on the tariff front and signs of fresh institutional inflows.

Indian government bond yields may hold within a narrow band, with the 10-year yield likely to hover around 6.28–6.32%, as traders monitor US Treasury yields and any further guidance from the Reserve Bank of India on liquidity operations. With the RBI’s variable rate reverse repo auction completed and banking system liquidity remaining in surplus, bond sentiment may remain stable. However, the announcement of additional supply or weak demand in future auctions could cap gains in long-duration bonds.

The Indian rupee may stay under pressure amid renewed concerns over US trade policy, especially after President Trump’s threat of a 10% tariff on BRICS-aligned countries. The local unit could test 86.00–86.50 in the absence of constructive developments on the trade front. Market participants will also track US economic data and Fed commentary for cues on dollar direction. Any RBI intervention could temper volatility, but unless there is clarity on trade or a material pickup in foreign inflows, the rupee’s recovery may remain limited in the near term.

Key Events & Data Due Tuesday:

Economic Data

• US Fed's Balance Sheet
• Japan May Adjusted Current Account Data
• Germany May Trade Balance (May)

Corporate Actions

• Earnings: 5Paisa Capital, UMIYA BUILDCON

Policy Events

• RBA Interest Rate Decision
• German Buba President Nagel Speaks