RIL Drags Nifty Lower; Rupee Flat As Markets Eye Trade Deal Clarity

HIGHLIGHTS

• Hybrid, Arbitrage Funds See Higher Inflows; Equity MF Inflows Up 24% in June
• Asian Paints sells entire 4.4% stake in Akzo Nobel India worth ₹7.54 billion
• Godrej Properties fall after Nomura warns of miss to FY26 pre-sales guidance
• Vedanta decline 4.5% as Viceroy Research shorts parent's debt
• IT stocks drop up to 1.5% ahead of TCS earnings Thursday

Indian equities ended lower on Tuesday after a largely rangebound session, as last-hour selling dragged the Nifty 50 below the 25,500 mark. Investors turned cautious ahead of a key trade policy announcement from US President Donald Trump, who is expected to unveil agreements with seven additional countries on Wednesday.

Weakness in heavyweights such as Reliance Industries, which fell sharply in the final hour, added to the pressure on benchmarks. IT stocks also weighed on sentiment, with the Nifty IT index losing 1% as investors awaited TCS' quarterly earnings report. Tata Steel, HCL Technologies, Hindalco Industries, Apollo Hospitals, and Tech Mahindra were among the top laggards on the Nifty.
 

Sectoral Performance
On the sectoral front, Metal, Realty, and Oil & Gas indices each fell 1.4%, while Media, IT, and PSU Bank indices declined around 0.5%. In contrast, FMCG, Auto, and Consumer Durables stocks saw modest buying interest, rising between 0.3% and 0.8%.

The Nifty Pharma index closed flat despite trade risks after President Trump threatened to impose a 200% tariff on all pharmaceutical imports—a move that could have implications for Indian drugmakers.

Select non-banking financial stocks and FMCG majors provided some cushion to the broader market. Shriram Finance and Hindustan Unilever were among the top Nifty gainers. However, broader sentiment remained fragile, especially in the real estate space, as shares of Phoenix Mills and Godrej Properties declined following negative commentary from brokerages. Overall, caution prevailed as markets awaited fresh global cues.

Top Gainers	% Change	Top Losers	% Change
NIFTY FMCG	0.80%	NIFTY REALTY	-1.49%
NIFTY CONSUMER DURABLES	0.48%	NIFTY METAL	-1.40%
NIFTY AUTO	0.38%	NIFTY OIL & GAS	-1.25%
NIFTY PHARMA	0.19%	NIFTY IT	-0.78%
NIFTY FINANCIAL SERVICES	0.15%	NIFTY PSU BANK	-0.43%

Indian government bonds closed lower on Wednesday as the Reserve Bank of India’s continued liquidity withdrawal moves weighed on investor sentiment. The benchmark 10-year bond yield rose to 6.3136%, up from 6.3053% in the previous session, while the five-year 6.75% 2029 bond ended at 5.9704%, compared with Tuesday’s close of 5.9569%.

Earlier in the day, the RBI conducted a two-day variable rate reverse repo operation, withdrawing ₹973.15 billion from the banking system. This adds to the ₹1 trillion withdrawn through a seven-day VRRR last week. These successive liquidity operations reflect the central bank’s effort to manage the large banking system surplus, which currently stands at an average of ₹3.85 trillion for July — more than 1.5% of total system deposits.

The impact of the RBI's tightening steps was visible in overnight money markets, where both the weighted average interbank call money rate and the tri-party repo (TREPS) rate climbed 10–15 basis points, indicating tightening funding conditions.

Bond traders also remained cautious ahead of any clarity on the outcome of the ongoing U.S.-India trade talks. Globally, sentiment remains sensitive to trade headlines, especially after President Donald Trump issued formal tariff notifications to key trading partners. The 10-year US Treasury yield stayed elevated, holding above 4.40% in Asian hours, reinforcing concerns about a delayed start to the Federal Reserve’s rate-cut cycle. These global cues may continue to influence Indian bond markets in the near term.

Tenure	Today	Previous
10-year Gilt	6.31%	6.31%
5-year gilt	5.97%	5.96%
5-year OIS	5.70%	5.71%

The Indian rupee ended nearly flat on Wednesday, as traders awaited clarity on a possible US-India trade deal and digested mixed global cues stemming from fresh US tariff announcements. The rupee settled at 85.6725 against the US dollar, almost unchanged from Tuesday’s close of 85.6950.

Earlier in the day, the rupee slipped to an intraday low of 85.9225 but recouped losses in the latter half of the session, supported by routine merchant flows and dollar sales by select foreign banks. Market participants remained cautious ahead of any developments on the trade front, particularly regarding India's position amid the White House’s widening tariff stance.

Globally, the dollar index eased slightly from its recent two-week high and hovered around 97.5, while Asian currencies traded mixed. Traders said the rupee continues to find support near the 86 level, with near-term resistance seen around 85.30–85.40.

Risk sentiment remained fragile following President Donald Trump’s latest tariff threats, which included a 50% duty on copper imports and potential levies on semiconductors, pharmaceuticals, and a blanket 10% tariff on BRICS nation imports. Regional equity markets reflected this caution, and India’s benchmark Nifty 50 and Sensex both declined by around 0.2%.

Traders also kept an eye on upcoming US economic cues, particularly the Federal Reserve’s June meeting minutes, due later in the day. The Fed commentary could shape expectations for interest rate cuts and, in turn, influence dollar-rupee forward premiums, which remained steady through the session.

Unit	Today	Previous
Dollar/Rupee	85.67	85.70
Dollar Index	97.57	97.39
1-year Dollar/rupee premium (%)	1.97%	1.96%

OUTLOOK
The equity market is expected to remain rangebound with a slight downward bias, as investors digest global trade policy risks and prepare for corporate earnings season. Benchmark indices may face resistance around the 25,500–25,600 zone, while support is likely near 25,200. Heavyweights such as Reliance Industries and IT majors could witness increased volatility, especially ahead of earnings from TCS and Infosys. Broader market participation may turn selective, with midcaps and real estate counters vulnerable to further correction. Traders will watch for clarity on the US-India trade deal, which could determine near-term direction. Defensive sectors like FMCG and select NBFCs may continue to outperform in this uncertain environment.

In the bond market, yields are expected to remain under upward pressure following the Reserve Bank of India’s continued liquidity absorption measures. The 10-year benchmark yield could move in the 6.30%–6.34% range in the near term. The focus will remain on RBI's future liquidity operations and global bond market cues. Rising US Treasury yields and concerns around new US tariffs may further limit buying appetite in long-duration Indian government securities.

The Indian rupee may trade with a slight depreciation bias, with the 85.30–85.90 range acting as key levels. While a US-India trade deal could support the currency, lingering uncertainty around broader US tariff policy—especially potential levies on pharmaceutical exports—could cap gains. Dollar demand from importers and foreign banks may also weigh. Traders will closely monitor the Fed’s tone in the latest minutes and upcoming US inflation data for cues on dollar strength and rate cut expectations.

Key Events & Data Due Thursday:
Economic Data

• Germany June CPI Data
• US Weekly Jobless Claims Data

Corporate Actions

• Earnings: Eimco Elecon (India), GTPL Hathway, Tata Consultancy Services, Tata Elxsi
• Tourism Finance Corporation of India to stock split

Policy Events

• Fed Waller speaks