Nifty Ends Flat; Rupee Slips on Trade Worries

HIGHLIGHTS

• Shilpa Medicare gains 4% after Bengaluru unit’s US FDA inspection clearance
• SBI to launch ₹250 billion crore QIP; LIC may bid over ₹50 billion
• Jio BlackRock gets SEBI approval to launch four passive funds
• HDFC Bank to consider its first-ever bonus issue of shares on July 19
• Biocon hit 52-week high as subsidiary receives FDA nod for diabetes drug
• IRDAI proposes doubled investment limits for insurers in REITs, InvITs

Indian equity benchmarks ended flat on July 16, with the Nifty 50 closing slightly above 25,200 after recovering from an intraday low of 25,121. The day’s trade was rangebound, but gains in auto, IT, financials, and realty sectors offered support.

IT stocks contributed to the market’s stability ahead of earnings releases. Wipro and Tech Mahindra each gained around 2% as investors positioned ahead of their quarterly results.

Sectoral Performance
Sectorally, PSU Bank stocks stood out, with the index rising nearly 2% amid reports the government may consider raising the foreign direct investment cap in state-owned lenders. State Bank of India led the rally, lifting broader sentiment within the financial space.

The Nifty Auto and Realty indices also advanced 1–1.5%, driven by buying in Mahindra & Mahindra, which gained over 2% on hopes that the GST Council could cut tax rates on farm equipment — a key segment for the automaker.

Top Gainers	% Change	Top Losers	% Change
NIFTY PSU BANK	1.81%	NIFTY METAL	-0.54%
NIFTY MEDIA	1.31%	NIFTY HEALTHCARE INDEX	-0.34%
NIFTY IT	0.63%	NIFTY PHARMA	-0.32%
NIFTY REALTY	0.50%	NIFTY FINANCIAL SERVICES	-0.05%
NIFTY FMCG	0.45%

Indian government bonds traded in a narrow band on Wednesday, with the benchmark 10-year gilt yield inching up to 6.3118%, from 6.3090% in the previous session, as traders stayed on the sidelines amid a lack of fresh domestic triggers and weak global cues.

Market volumes remained subdued, with bonds worth around ₹200 billion ($2.33 billion) changing hands — well below the July daily average of ₹476 billion, according to clearing house data. Dealers attributed the low activity to cautious positioning ahead of key global data and further liquidity signals from the Reserve Bank of India (RBI).

Sentiment was also dented by the RBI’s continued liquidity withdrawal operations. The central bank drained ₹1 trillion via a three-day variable rate reverse repo on Tuesday, following a ₹1.5 trillion withdrawal on Friday. These operations have kept overnight rates elevated and constrained demand for fresh bond positions.

Meanwhile, RBI Governor Sanjay Malhotra signalled a dovish inflation outlook in a CNBC-TV18 interview, stating that retail inflation for FY25 is expected to stay below 3.7%. He emphasised that the monetary policy committee will assess the inflation trajectory — not just current data — when deciding on interest rates.

India’s retail inflation fell to a six-year low of 2.1% in June, as per data released Monday. While this offers room for policy flexibility, traders remain cautious amid global volatility and await more definitive cues before repositioning. In the near term, bond yields are likely to remain range-bound, with RBI liquidity actions and US Treasury trends dictating direction.

Tenure	Today	Previous
10-year Gilt	6.31%	6.31%
5-year gilt	5.98%	5.99%
5-year OIS	5.74%	5.73%

The Indian rupee weakened on Wednesday amid a stronger dollar and elevated U.S. Treasury yields, as sticky US inflation reduced hopes of near-term Federal Reserve rate cuts. The rupee settled at 85.94 per dollar, down 0.1% from 85.81 in the previous session.

The local currency initially slipped below the 86-mark in early trade, weighed by a broadly firmer dollar, which hovered near a three-week high. The dollar index stood at 98.5, following a US consumer price inflation report that showed prices rose at the fastest pace in five months. The data indicated that recent U.S. tariffs are starting to seep into retail prices, dampening expectations of monetary easing by the Fed.

Traders said the likelihood of a Fed rate pause in September has increased, with the CME FedWatch tool showing odds of nearly 50%, up from 30% a week ago. The repricing of rate expectations has supported the dollar and lifted US bond yields, adding pressure on emerging market currencies including the rupee.

Despite the initial fall, the rupee recovered from session lows as dollar selling emerged near the 86-level. A trader at a state-run bank cited “clustered” dollar offers around that point, while others noted that custodian banks were active on the sell side, hinting at foreign inflows into domestic assets.

Unit	Today	Previous
Dollar/Rupee	85.94	85.81
Dollar Index	98.31	97.97
1-year Dollar/rupee premium (%)	1.96%	1.98%

OUTLOOK
Equity benchmarks may continue to show rangebound movement, with the Nifty 50 likely to consolidate around the 25,100–25,300 zone. Supportive buying in autos, IT, and financials could lend stability. Public sector banks may see continued interest if reports of a potential hike in the FDI cap materialise, offering a structural boost to sentiment. With earnings underway, stock-specific action will intensify, especially in IT and auto counters. However, sectors like metals and pharma could remain under pressure on valuation concerns and muted global cues. Investors will closely monitor GST Council outcomes, especially if farm equipment tax cuts are announced, benefiting rural-focused companies.

Government bond yields are expected to remain sticky, with the benchmark 10-year yield likely hovering around the 6.30% mark. The RBI’s sustained liquidity withdrawal through variable rate reverse repo operations will continue to weigh on sentiment. Despite a softer inflation print in June, the RBI is likely to remain cautious, reinforcing a neutral-to-tight stance in liquidity. Market participants will await clarity on fresh supply and cues from global bond markets, especially US yields, which remain elevated amid sticky inflation concerns.

The rupee is likely to remain under pressure near the 85.90–86.10 range, amid corporate dollar demand and persistent global uncertainty tied to US tariff policy. While dollar inflows from custodial banks may lend temporary support, upside for the currency will remain capped unless a clear breakthrough emerges in US-India trade talks. Traders will also watch for any RBI intervention to curb excess volatility, especially if the rupee breaches the 86.10 mark decisively.

Key Events & Data Due Thursday:
Economic Data

• Eurozone June CPI Data
• Japan June Trade Data
• US June Core Retail Sales Data
• US Weekly Jobless Claims Data
• US July Philadelphia Fed Manufacturing Index
• US June Retail Sales Data

Corporate Actions

• Earnings: 360 ONE WAM, Alok Industries, Axis Bank, CEAT, Clean Science and Technology, HDFC Asset Management Company, Heritage Foods, Jio Financial Services, Krishana Phoschem, LTIMindtree, Navkar Corporation, Newgen Software Technologies, Nuvoco Vistas Corporation, Polycab India, ROUTE MOBILE, Shoppers Stop, Sterling and Wilson Renewable Energy, Sunteck Realty, Tata Communications, The Indian Hotels Company, The South Indian Bank, Waaree Renewable Technologies, Wipro
• Housing & Urban Development Corporation to consider fund raising

Policy Events

FOMC Member Daly Speaks  

• FOMC Member Williams Speaks