Equities Fall On Profit Booking; Gilt Yields Rise After GDP Surprise

HIGHLIGHTS

• India’s January–March GDP Growth Beats Estimates At 7.4%, 2024-25 At 6.5%
• Finance ministry seeks relaxation in RBI's gold loan proposals
• Shalby shares decline over 5% after loss widens sequentially, margins narrow
• Kiri Industries shares fall 10% after net loss widens, revenue drops
• SJVN shares drop 5% after higher expenses drag PSU to a net loss

Indian equities ended lower on Friday, with the benchmark BSE Sensex falling 182 points to close at 81,451, while the NSE Nifty declined 83 points to settle at 24,751. Both indices posted a weekly loss of 0.3%, reflecting a mild pullback after recent highs.

However, the broader market displayed strength. The Nifty Midcap 100 index rose over 1% for the week, highlighting sustained investor appetite for mid-sized companies. Financials also remained a bright spot, with the Nifty Bank index advancing nearly 1% over the week. On Friday alone, it gained 204 points to close at 55,750, aided by strong recoveries in select PSU banks.

Sectoral Performance
Punjab National Bank rebounded 5% from intraday lows, helping the Nifty PSU Bank index register a 3% gain. Canara Bank also contributed to the sector's outperformance, underscoring improving sentiment towards state-run lenders.

In contrast, metal stocks continued to struggle. Persistent worries about U.S.-China tariff tensions weighed on the sector, with Hindalco dropping over 2%. The auto pack also lagged, with Bajaj Auto slipping more than 3% after a cautious outlook from its management tempered investor enthusiasm.

Overall, while frontline indices showed some fatigue, underlying market activity hinted at selective strength, particularly in financials and midcaps, even as global trade concerns pressured metal counters.

Top Gainers	% Change	Top Losers	% Change
NIFTY PSU BANK	2.88%	NIFTY METAL	-1.69%
NIFTY BANK	0.37%	NIFTY IT	-1.15%
NIFTY FINANCIAL SERVICES	0.08%	NIFTY AUTO	-0.98%
NIFTY MEDIA	0.01%	NIFTY CONSUMER DURABLES	-0.76%
		NIFTY OIL & GAS	-0.76%

Indian government bonds ended weaker on Friday as better-than-expected GDP data prompted a late-session sell-off, with the benchmark 10-year yield rising to 6.2304% from the previous close of 6.1794%. The strong economic reading slightly tempered market expectations of aggressive monetary easing, triggering profit-booking in longer-dated securities.

Despite Friday’s move, bond yields have declined steadily over the past three months, aided by consistent policy support. The 10-year yield dropped 13 basis points in May, following falls of 14 bps in April and 22 bps in March, as investors priced in a sustained rate-cutting cycle by the Reserve Bank of India (RBI).

The broader gilts market remains hopeful of further easing, with a 25-basis-point cut widely expected at the upcoming June 6 policy review. Traders believe the RBI may also unveil liquidity-supportive measures, especially to address temporary cash imbalances, which has kept demand steady for shorter-tenure papers.

The short-end of the curve saw increased interest during the week, supported by speculation that the RBI could complement its rate action with supportive liquidity tools, such as variable rate repo or bond-switch operations. Market sentiment remains constructive, even as stronger macroeconomic signals may test the central bank’s dovish resolve.

Tenure	Today	Previous
10-year Gilt	6.23%	6.18%
5-year gilt	5.88%	5.84%
5-year OIS	5.68%	5.64%

The Indian rupee ended May with a decline of nearly 1%, reversing gains from the previous two months. The domestic currency settled at 85.5775 per US dollar on Friday after a session of rangebound trade, reflecting persistent headwinds from global and regional developments.

Early in the month, geopolitical tensions between India and Pakistan triggered a brief sell-off in the rupee. However, sentiment stabilised after a ceasefire was announced. Despite the easing of tensions, the rupee faced sustained pressure through May due to consistent dollar demand from corporates and foreign banks, particularly toward month-end for payments and hedging needs.

Currency traders noted that interventions by the Reserve Bank of India (RBI) curbed any sharp appreciation. The central bank was seen actively buying dollars in the 84.60–84.80 range, likely to build reserves and manage volatility, thereby capping the rupee’s upside.

Regionally, the rupee lagged behind some Asian peers, which found support from intermittent relief in US trade rhetoric. However, the dollar index remained largely flat for the month as markets grappled with mixed signals—initial optimism from a trade pact with China gave way to renewed concerns over the legal standing of reciprocal tariffs.

Unit	Today	Previous
Dollar/Rupee	85.58	85.52
Dollar Index	99.34	99.21
1-year Dollar/rupee premium (%)	1.99%	2.04%

OUTLOOK
Equities are likely to see subdued momentum after benchmark indices ended the week marginally lower. However, continued strength in midcap and banking stocks—especially PSU banks—could offer some support. Sectoral rotation may dominate in the near term, with investors likely to favour stocks with strong earnings visibility and government-linked reform momentum. Volatility may remain elevated ahead of the RBI policy meeting.

In the bond market, traders will likely react to the stronger-than-expected Q4 GDP data, which surprised markets and pushed the yield higher. Despite the data beat, sentiment remains largely supportive, anchored by expectations of a 25 bps rate cut in the RBI’s June 6 policy. Bond yields may stabilise at current levels, but any indication of additional liquidity support measures could bring fresh demand, especially at the shorter end of the curve.

The Indian rupee may remain rangebound in the coming sessions. While softening US trade rhetoric and stability in Asian currencies offer relief. Geopolitical concerns have eased, but traders will closely watch global risk cues and dollar index movements for direction.

Key Events & Data Due Monday:

Economic Data

• India May S&P Manufacturing PMI
• US May S&P Manufacturing PMI
• US April Construction Spending data

Corporate Actions

• Mercator Ltd board to consider earnings for March quarter

Policy Events

• US Fed Chair Powell speaks
• German Buba Balz speaks