Equities Rebound; Rupee Posts Biggest Gain Since Nov 2022

HIGHLIGHTS

• Bondada Engineering hits 10% upper circuit on ₹90-billion order win
• BEML profit up 12% year-on-year, margin expands 
• JSW Steel profit rises 13.5% to ₹15 billion, revenue down 3%
• Ola Electric up 7% as board approves ₹17 billion fundraise via NCDs and others

Indian equity markets ended the week on a positive note, staging a strong rebound on Friday as benchmark indices surged nearly 1%, led by gains in information technology and fast-moving consumer goods stocks. This provided some relief after a volatile week marked by global uncertainty and sector-specific selling.

The upbeat close notwithstanding, the broader tone for the week remained negative. Frontline indices—Sensex and Nifty—posted weekly losses of nearly 1%, reflecting weakness earlier in the week triggered by global equity selloffs, pressure from rising US bond yields, and persistent foreign institutional outflows.

Sectoral Performance
Broader markets also participated in Friday’s rebound, although the gains were more modest compared to frontline stocks. Sectoral indices showed strength across the board, with IT, FMCG, and auto among the best performers.

Top Gainers	% Change	Top Losers	% Change
NIFTY FMCG	1.63%	NIFTY PHARMA	-0.41%
NIFTY FINANCIAL SERVICES	0.99%	NIFTY HEALTHCARE INDEX	-0.01%
NIFTY IT	0.95%
NIFTY BANK	0.83%
NIFTY OIL & GAS	0.78%

Indian government bond yields ended lower on Friday, closing the week on a softer note amid growing expectations of a record surplus transfer from the Reserve Bank of India and continued policy support. The easing came despite upward pressure from rising US Treasury yields.

The yield on the new benchmark 10-year gilts settled at 6.2107%, down from 6.2339% in the previous session. This marked a moderate weekly decline, reflecting underlying demand for sovereign debt amid favourable domestic conditions.

Investor interest remained focused on the shorter end of the curve, with the five-year 6.75% 2029 bond yield falling sharply to 5.8521%, down by 11 basis points for the week. This decline came despite a fresh auction of the same bond on Friday, indicating firm appetite for short-term gilts as traders bet on the near-term rate trajectory remaining dovish.

Tenure	Today	Previous
10-year Gilt	6.21%	6.23%
5-year gilt	5.84%	5.88%
5-year OIS	5.63%	5.67%

The Indian rupee posted its strongest single-day gain since November 2022 on Friday, recovering sharply from recent lows as a confluence of supportive global and domestic factors lifted sentiment. The currency appreciated by 78 paise, settling at 85.22 per US dollar, compared to 86.00 in the previous session.

The sharp rebound, amounting to a 1.03% intraday gain, came despite the rupee briefly slipping to 86.04 earlier in the session. The turnaround was driven by likely foreign inflows, a weaker US dollar, and declining crude oil prices, which helped ease concerns over India’s external balance.

The rupee's strong showing followed a turbulent week in which it had breached the 86-mark for the first time in over a month, prompting concerns about sustained depreciation. Even after Friday’s appreciation, the rupee remains down 0.85% for the month, underscoring lingering pressure from global factors and domestic dollar demand.

A key trigger for the greenback’s weakness was the US House’s approval of a tax bill projected to add $3.8 trillion to the federal debt over the next decade. This exacerbated fiscal concerns and dragged down the Dollar Index to 99.36, a 0.6% decline, signaling waning investor confidence in US assets.

Unit	Today	Previous
Dollar/Rupee	85.21	86.00
Dollar Index	99.36	99.64
1-year Dollar/rupee premium (%)	2.06%	2.06%

OUTLOOK
Indian equity markets are expected to open on a cautious note next week as global concerns and domestic fiscal signals weigh on sentiment. Despite Friday’s rebound led by IT and FMCG gains, investors may remain guarded amid volatility in global markets and uncertainty over US fiscal policy. The focus will likely shift to sector-specific cues and institutional flows, with profit-taking possible after recent swings.

In the bond market, yields may see a mild upward bias after the Reserve Bank of India’s decision to raise the Contingent Risk Buffer to 7.5%, which effectively reduced the government’s expected surplus from the central bank. The RBI’s ₹2.69 trillion surplus transfer—though a record—is significantly below market expectations of over ₹3.5 trillion. This shortfall could limit the Centre’s fiscal flexibility. 

The Indian rupee, after posting its strongest single-day gain since November 2022, may find limited room for further appreciation. While softening crude oil prices and a weaker US dollar offer support, sustained corporate dollar demand and concerns over the US debt trajectory could cap upside.

Key Events & Data Due Monday:

Corporate Actions

• Jan-Mar earnings: Action Construction Equipment, Ajooni Biotech, Aurobindo Pharma, Bafna Pharmaceuticals, Balaji Amines, Blue Dart Express, Fertilizers and Chemicals Travancore, General Insurance Corporation of IndiaGillette India, India Pesticides, Jindal Drilling And Industries, KEC International, Lyka Labs, Maharashtra Seamless, Monte Carlo Fashions, Nazara Technologies, NDR INVIT TrustPTC India, Saksoft, Sundaram Brake Linings, and Venus Remedies

Policy Events

• ECB President Lagarde Speaks  
• German Buba President Nagel Speaks