Equities Slide; Rupee Slips Amid West Asia Conflict, FII Outflows

HIGHLIGHTS

• Donald Trump's 'tariffs coming soon' remark sinks Pharma stocks yet again
• NSE gets SEBI's go ahead for Tuesday expiry, BSE gets Thursday
• Zee Entertainment promoters to infuse ₹22.37 billion to strengthen balance sheet
• Vishal Mega Mart shares fall 7% after equity worth ₹104.88billion changes hands
• MCX shares hit fresh high on likely plans to launch electricity derivatives this year

Indian equity benchmarks ended sharply lower on Tuesday, dragged down by selling across sectors and continued underperformance in the broader market. The Nifty 50 fell below the 24,900 mark, while the Sensex slipped from record highs, reflecting profit booking and cautious investor sentiment amid global headwinds.

Mid- and small-cap stocks faced the brunt of the sell-off, with the Nifty Midcap 100 index dropping 389 points to 58,379. Weak market breadth, with a 1:2 advance-decline ratio, signalled persistent pressure in the broader market. The Nifty Bank index also declined by 231 points, closing at 55,714, with private lenders weighing on the index.

 Sectoral Performance
All indices, barring IT and defence, ended in the red. The Nifty Pharma index underperformed again, posting losses in three of the past four sessions. Investor concerns over US drug pricing policies, reignited by remarks from former President Donald Trump, continued to dampen sentiment in the pharma space.

Defence-related stocks outperformed on safe-haven buying as geopolitical tensions between Israel and Iran entered a fifth consecutive day. Mazagon Dock Shipbuilders surged 4%, leading gains among defence counters, while other names such as HAL and BEL saw modest advances.

Top Gainers	% Change	Top Losers	% Change
NIFTY IT	0.72%	NIFTY PHARMA	-1.89%
		NIFTY HEALTHCARE INDEX	-1.79%
		NIFTY METAL	-1.43%
		NIFTY CONSUMER DURABLES	-0.73%
		NIFTY OIL & GAS	-0.73%

Indian government bonds ended marginally weaker on Tuesday after surrendering early gains, as market participants adopted a cautious stance ahead of key domestic and global central bank developments. The yield on the 10-year benchmark bond closed at 6.2646%, down slightly from 6.2732% in the previous session, while the five-year 6.75% 2029 bond yield eased to 5.9394% from 5.9642%.

Early optimism was driven by dovish remarks from Reserve Bank of India Governor Sanjay Malhotra, who indicated in a media interview that inflation trending below the central bank’s current forecasts could create policy space. This reassured markets about the possibility of supportive monetary conditions, despite the RBI's recent move to shift its stance to ‘neutral’ following a surprise 50 basis point rate cut earlier this month.

However, the gains faded as traders turned cautious ahead of the RBI Monetary Policy Committee minutes due Friday, and the US Federal Reserve’s policy outcome scheduled for Wednesday night. Market participants are closely watching for signals on future rate trajectories, especially amid evolving global inflation dynamics.

Tenure	Today	Previous
10-year Gilt	6.26%	6.27%
5-year gilt	5.94%	5.96%
5-year OIS	5.69%	5.73%

The Indian rupeeweakened by 17 paise on Tuesday, closing at 86.24 against the US dollar, as rising global crude oil prices, ongoing geopolitical tensions, and persistent foreign portfolio outflows weighed on sentiment. The currency, which briefly strengthened to 85.88 following a $500 million inflow linked to Biocon, later depreciated on sustained dollar demand.

Brent crude futures advanced 1.6% to $74.40 per barrel, stoking concerns that escalating Israel-Iran conflict could disrupt oil supplies through the vital Strait of Hormuz. Higher crude prices are likely to widen India's trade deficit, exerting pressure on the rupee.

Foreign institutional investors continued to sell Indian equities for the sixth consecutive session, converting proceeds into dollars. Additionally, dollar demand from oil companies for outward remittances further weighed on the rupee.

The domestic unit's close below the 86.20 mark raises the risk of further weakness, with potential to test 86.70 in the near term unless risk appetite returns. Broader global cues remain unsupportive, as the dollar gained amid safe-haven demand.

Unit	Today	Previous
Dollar/Rupee	86.24	86.07
Dollar Index	98.17	97.96
1-year Dollar/rupee premium (%)	1.82%	1.84%

OUTLOOK
Equity markets may stay under pressure as investors continue to assess geopolitical risks, especially the ongoing Israel-Iran conflict. Broader market sentiment is expected to remain cautious, with mid- and small-cap stocks facing greater vulnerability due to persistent selling pressure and weak market breadth. However, sectors such as IT and defence may provide relative support, driven by safe-haven buying and sector-specific triggers.

In the bond market, traders will closely monitor the RBI’s June policy minutes and global central bank commentary, including the US Federal Reserve’s stance. While recent dovish remarks from the RBI Governor have improved sentiment, upside risks to inflation from elevated crude prices and geopolitical instability could limit further bond price gains. Yields are expected to remain range-bound, with the benchmark 10-year yield likely hovering around 6.26–6.30%.

The rupee is expected to face sustained depreciation pressures in the short term, given the rise in global crude oil prices, consistent FII outflows, and growing risk aversion globally. With the rupee closing below key support levels, further weakness towards the 86.70/$ mark is plausible. RBI intervention may smoothen volatility, but structural pressures like India’s investment deficit and rising external uncertainties could weigh on the local currency.

Key Events & Data Due Wednesday:

Economic Data

• US weekly jobless claims data
• US weekly crude oil inventories data
• US May housing starts data
• Eurozone May Core CPI data

Corporate Actions

• Highways Infrastructure Trust to consider fund raising
• T T Ltd to consider fund raising
• Vedanta to consider dividend

Policy Events

• US Fed interest rate decision
• ECB's Elderson speaks
• ECB's De Guindos speaks
• BoC Gov Macklem speaks
• German Buba President Nagel speaks
• ECB's Lane speaks