Equities Extend Weekly Losses, Rupee Recovers Slightly Amid RBI Support

HIGHLIGHTS

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Indian equities ended lower on Friday, extending their losing streak to a fifth straight week—the longest since mid-2023—as weak global sentiment and persistent sectoral pressure dragged markets. The Nifty 50 closed the session in the red, ending the week with a 1% decline, while the Sensex followed a similar trajectory. Broader indices fared worse, with the Nifty Bank and Midcap indices each losing around 2% for the week.

Sectoral Performance
The weakness was broad-based, with selling across most sectors. Pharma stocks led the decline after US President Donald Trump renewed his call to cut drug prices, triggering sharp losses in Sun Pharma, Cipla, and Dr. Reddy’s—each falling over 4%. IT stocks also struggled amid cautious global sentiment. Infosys and Wipro lost nearly 3% each, marking a continued retreat for the sector. IndusInd Bank declined 2% after reports that the Ministry of Corporate Affairs may open a suo motu probe into the lender.

FMCG stocks, however, provided some cushion. Trent, HUL, and Asian Paints were among the few gainers in the Nifty basket. Select auto stocks also bucked the trend, with Eicher Motors and TVS Motor gaining after July vehicle sales met market expectations. Overall, sentiment remained fragile amid weak overseas cues and sector-specific headwinds.

Top Gainers	% Change	Top Losers	% Change
NIFTY FMCG	0.69%	NIFTY PHARMA	-3.33%
		NIFTY HEALTHCARE INDEX	-2.77%
		NIFTY METAL	-1.97%
		NIFTY IT	-1.85%
		NIFTY REALTY	-1.78%

Indian government bond yields ended largely flat on Friday, capping a cautious week ahead of the Reserve Bank of India's (RBI) upcoming policy decision. The benchmark 10-year yield closed at 6.3680%, down slightly from Thursday’s 6.3735%, but still up 2 basis points for the week—following a 3 bps rise last week.

The day’s bond auction, worth ₹320 billion, saw only marginally softer demand, keeping yields steady. However, traders stayed on the sidelines, awaiting clear signals from the central bank. While June’s retail inflation fell to a six-year low and economic growth remained tepid—conditions that typically warrant further easing—expectations for an imminent rate cut have cooled.

RBI Governor Sanjay Malhotra recently signaled that further rate cuts are less likely unless warranted by a change in the growth-inflation outlook. He emphasized that the central bank's current stance is “neutral,” a step away from its earlier accommodative approach. This has tempered hopes that the RBI would follow up its 50 bps rate cut in June with another reduction at the August meeting.

Bond traders will closely watch the RBI’s policy statement on Wednesday for clarity on the central bank’s evolving priorities, especially around liquidity management and long-term inflation trends.

Tenure	Today	Previous
10-year Gilt	6.37%	6.37%
5-year gilt	6.01%	6.02%
5-year OIS	5.72%	5.73%

The Indian rupee edged slightly higher on Friday, helped by likely Reserve Bank of India intervention, but still recorded its steepest weekly decline since December 2022. The currency closed at 87.54 per US dollar, recovering modestly from Thursday’s close of 87.5950. However, it fell 1.2% for the week, hit by renewed tariff concerns and persistent foreign outflows.

The rupee came under pressure after US President Donald Trump announced a 25% tariff on Indian imports, sparking fears of further trade friction. On Thursday, the rupee had dropped to 87.74, just shy of its record low of 87.95. While the RBI’s intervention on Friday offered temporary support, market participants expect the rupee to remain under downward pressure in the near term.

Sustained foreign portfolio outflows added to the rupee’s weakness, with overseas investors selling $2 billion worth of Indian equities in July. Dollar demand from corporates has also remained elevated, exacerbating pressure on the currency.

Asian peers, too, lost ground amid broader trade concerns. Looking ahead, the RBI’s policy meeting and further developments on US trade actions will shape the rupee’s trajectory. Traders also remain cautious about the risk of secondary sanctions as geopolitical tensions involving Russia escalate.

Unit	Today	Previous
Dollar/Rupee	87.53	87.60
Dollar Index	100.09	99.84
1-year Dollar/rupee premium (%)	1.96%	1.98%

OUTLOOK
Indian equities are likely to face continued pressure after closing out their fifth straight weekly loss, the longest since mid-2023. With persistent selling in pharma, IT, and banking stocks, sentiment will remain subdued unless there is a strong catalyst. Any further statements from global leaders—such as US President Trump's rhetoric on pharma pricing and trade tariffs—could weigh on investor confidence. However, FMCG and select auto stocks may continue to offer relative support due to their defensive nature and stable sales data. Market participants will also track incoming earnings reports and foreign investor behavior closely.

Government bond yields are expected to stay range-bound ahead of the Reserve Bank of India’s policy decision on August 6. The central bank’s recent liquidity withdrawals and its shift to a neutral stance have tempered rate cut expectations, even as inflation has cooled. Unless the RBI signals dovishness, traders will likely remain cautious, and yields may continue to inch higher. Auctions and cash absorption trends will be watched for further clarity on bond supply-demand dynamics.

The rupee is likely to remain under pressure in the near term, given ongoing foreign portfolio outflows, high corporate dollar demand, and global trade uncertainties. While RBI intervention may provide intermittent support, the currency could test fresh lows if the US-India tariff dispute escalates or if global risk sentiment weakens. Traders will watch US jobs data and dollar index movements for near-term direction. Domestic policy guidance from the RBI and any shift in foreign investor flows will be critical to the rupee's trajectory.

Key Events & Data Due Monday:

Economic Data

• US June Factory Orders Data

Corporate Actions

• Earnings: Aditya Birla Capital, Deep Industries, DLF, Escorts Kubota, Everest Industries, Godfrey Phillips India, INOX India, Kansai Nerolac Paints, Marico, Ramco Industries, Sundaram Finance, Tata Investment Corporation, Tourism Finance Corporation of India, TTK Healthcare, Akzo Nobel India, Aurobindo Pharma, Bosch, 
• Tata Investment Corporation to consider stock split
• Agi Infra to consider stock split
• Godfrey Phillips India to consider bonus share issue

Policy Events

• RBI Monetary Policy Committee 3-day Meeting Begins