Equities Slide Over 1%, Rupee Weakens As Global Sentiment Sours

HIGHLIGHTS

• Hindalco to acquire Bandha coal block leaseholder to fuel smelting operations
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• Bharat Electronics sees over 15% revenue growth for 2025-26
• Karur Vysya Bank shares rise 4% on strong earnings
• Pfizer shares jump 11% as profit soars 85% YoY in March quarter

Indian equity markets ended notably lower on Tuesday. Both benchmark indices—the BSE Sensex and NSE NIFTY 50—fell over 1% amid widespread selling. This was largely led by profit-booking across key sectors following recent gains, weighing on frontline stocks and broader market sentiment.

Auto stocks led the decline, reversing their brief rebound from Monday. Three of the four worst-performing Nifty constituents came from the auto sector, reflecting growing concerns over high valuations and an uncertain demand outlook. The retreat in auto counters highlighted a broader reassessment of sector fundamentals.

BSE Midcap and Smallcap indices also declined. However, they were relatively more resilient compared to the large-caps.

Sectoral Performance
All sectoral indices closed in the red, with auto, healthcare, media, and pharma among the worst performers. Financials and FMCG names also witnessed selling pressure, contributing to the broad-based fall.

Defence-linked stocks remained under pressure for a second consecutive day, with select names declining between 2% and 8% as investors booked profits after a prolonged rally.

Top Losers	% Change
NIFTY AUTO	-2.17%
NIFTY HEALTHCARE INDEX	-1.41%
NIFTY MEDIA	-1.36%
NIFTY FINANCIAL SERVICES 25/50	-1.32%
NIFTY FMCG	-1.32%

Indian government bond yields declined on Tuesday, supported by value buying in bonds after the previous session’s uptick. The 10-year benchmark gilts yield eased to 6.2228%, down from Monday’s close of 6.2382%, reflecting renewed demand despite recent volatility.

Monday’s late-session sell-off, triggered by the Reserve Bank of India’s smaller-than-expected bond purchase of ₹192.03 billion through open market operations, had temporarily pushed yields higher. The amount was less than 80% of the targeted size, leading to disappointment among market participants.

However, broader sentiment in the bond market remains constructive. The recent easing in retail inflation—still below the central bank’s 4% target—and expectations of a dovish stance at the June 6 monetary policy meet are keeping bond bulls active.

A key near-term trigger will be the RBI’s upcoming dividend transfer to the government. Market estimates suggest the central bank may transfer a record surplus of ₹3.5–4 trillion, well above last year’s ₹2.1 trillion. The announcement is expected later this week and could further improve the Centre’s fiscal buffer.

In 2025 so far, the RBI has purchased over ₹5 trillion worth of government bonds via OMOs and secondary market operations, significantly impacting demand-supply dynamics and anchoring yields.

Tenure	Today	Previous
10-year Gilt	6.22%	6.24%
5-year gilt	5.90%	5.94%
5-year OIS	5.68%	5.71%

The Indian rupee depreciated on Tuesday, closing at 85.6350 against the US dollar, marking a 0.3% drop from the previous session. The weakness stemmed primarily from sustained dollar demand by foreign banks, likely acting on behalf of custodial clients amid equity outflows and seasonal corporate remittances.

Despite a broadly weaker dollar index—driven by rising concerns over US fiscal sustainability, trade policy uncertainty, and a gradual erosion of investor confidence in the US economy—the rupee failed to capitalise on the global trend. Market participants cited pressure from foreign fund outflows and a dip in domestic equities as key local headwinds.

Adding to the rupee’s woes was a decline in the Chinese yuan after Beijing unexpectedly trimmed key benchmark lending rates, indicating renewed concerns about China’s growth outlook. The move led to a broader pullback in Asian currencies, denting regional sentiment. 

Unit	Today	Previous
Dollar/Rupee	85.64	85.40
Dollar Index	100.24	99.98
1-year Dollar/rupee premium (%)	2.08%	2.08%

OUTLOOK
Benchmark indices may face further consolidation as investors reassess valuations in sectors such as autos, financials, and defence, which witnessed sharp profit-booking. Sentiment in the broader markets could stay resilient, but frontline indices may underperform amid global uncertainty and domestic fund rotation. Continued pressure on defence stocks, which extended losses for a second session, may persist if profit-taking deepens. 

On the bond front, Indian government securities are expected to hold a positive undertone despite near-term consolidation. The 10-year benchmark yield may ease further as traders could focus on value buying supported by favourable inflation trends and expectations of a record RBI dividend payout.

The Indian rupee is likely to remain under pressure in the short term due to persistent foreign dollar demand, weak Chinese yuan, and subdued domestic equities. However, downside may be capped if global risk appetite improves and the dollar index remains soft. Traders will closely monitor equity flows, oil prices, and global central bank cues, which could sway the rupee.

Key Events & Data Due Wednesday:

Economic Data

• Japan April trade data
• UK April CPI data
• ECB Financial Stability report
• US weekly crude oil inventories data

Corporate Actions

• Jan-Mar earnings: Bannari Amman Spinning Mills, Colgate Palmolive (India), Cupid, Emkay Global Financial Services, Geojit Financial Services, Gokaldas Exports, Gulf Oil Lubricants India, IndusInd Bank, InterGlobe Aviation, Kanoria Chemicals & Industries, Mankind Pharma, National Aluminium Company, Noida Toll Bridge Company, NTPC Green Energy, Oil & Natural Gas Corporation, Oil India, Power Finance Corporation, Rail Vikas Nigam, Ramco Systems, Remsons Industries, Trident, UNO Minda, VA Tech Wabag.
• IIFL Finance to consider fundraising, 

Policy Events

• German Buba Burkhard Balz speaks
• US FOMC member Michelle Bowman speaks 
• ECB's Philip Lane speaks