Nifty Slips Below 25,200; Rupee Hits 3-Week Low on Stronger Dollar

HIGHLIGHTS

• Axis Bank reports sharp increase in slippages; asset quality deteriorates
• Adani Enterprises to earn ₹108.74 billion cash after 20% stake sale in AWL Agri
• Thermax shares jump 12% after Kotak raises price targets on margin hopes
• Hexaware Tech rise 3% on deal to acquire SMC Square entities for ₹10.29 billion
• Wipro net profit rises 11% YoY to ₹33.30 billion, beats estimates

Indian equities declined sharply on Thursday as investor sentiment turned cautious ahead of key corporate earnings. The Nifty 50 closed notably lower, surrendering early gains amid weakness in banking and IT stocks, while midcaps continued to underperform.

The Nifty Bank index led the fall, losing 340 points or 0.7%, with Axis Bank and ICICI Bank dragging the sub-index lower. Public sector banks also saw profit booking, reversing recent gains and pulling the PSU Bank index down 1%.

In the broader market, the Nifty Midcap 100 slipped 102 points to end at 59,519, extending its underperformance against frontline indices. Investors turned selective as corporate results began to trickle in, and expectations of muted earnings capped risk appetite.

Sectoral Performance
IT stocks were among the biggest laggards. LTI Mindtree and Wipro fell over 2% each ahead of their upcoming earnings, while Axis Bank also declined ahead of its results, reflecting investor unease over the near-term outlook.

Metals provided some relief to the market, staging an intra-day recovery. Tata Steel and JSW Steel rebounded strongly, limiting further losses in the benchmark indices.

Adding to the pressure, regulatory developments weighed on trading sentiment. Shares of BSE dropped after a Securities and Exchange Board of India (SEBI) official signalled support for longer-duration derivatives contracts. Market participants viewed this as a potential threat to volumes in shorter-tenure contracts.

Top Gainers	% Change	Top Losers	% Change
NIFTY REALTY	1.24%	NIFTY IT	-1.39%
NIFTY METAL	0.67%	NIFTY PSU BANK	-0.79%
NIFTY CONSUMER DURABLES	0.50%	NIFTY BANK	-0.59%
NIFTY PHARMA	0.38%	NIFTY PRIVATE BANK	-0.58%
NIFTY FMCG	0.28%	NIFTY FINANCIAL SERVICES	-0.40%

 Indian government bond yields declined on Thursday, with the benchmark 10-year yield easing to 6.3010% from 6.3118% in the previous session. This marked a brief deviation from the recent rangebound trend, as growing expectations of further rate cuts by the Reserve Bank of India encouraged some traders to build fresh positions.

The move comes after retail inflation fell sharply to 2.10% in June, the lowest reading in over six years. With July inflation expected to fall further, several market participants are beginning to price in the possibility of one more interest rate cut in the coming months.

The RBI’s monetary policy committee had reduced the repo rate by 50 basis points in June and shifted its stance to neutral. While many saw that as the end of the easing cycle, the deep disinflationary trend is reviving dovish expectations.

In the near term, the focus will shift to the upcoming government bond auction. The Centre plans to raise ₹270 billion through the sale of a new five-year and a 30-year bond on Friday. The pricing of the five-year note, in particular, will be closely watched for signs of demand in shorter-duration debt.

Meanwhile, liquidity conditions will remain a key driver of bond sentiment. Traders await the size and timing of the next variable rate reverse repo auction by the RBI, with over ₹2 trillion worth of VRRRs set to mature on Friday. The RBI’s liquidity management approach will likely steer short-term yields in the sessions ahead.

Tenure	Today	Previous
10-year Gilt	6.30%	6.31%
5-year gilt	5.97%	5.98%
5-year OIS	5.72%	5.74%

The Indian rupee weakened on Thursday, breaching the 86-per-dollar mark to settle at a three-week low of 86.0750, compared with 85.94 in the previous session. Despite the slide, dollar selling by exporters and foreign banks helped cushion the currency from deeper losses.

The rupee fell to an intraday low of 86.09 toward the close, pressured by broad strength in the dollar. The dollar index rose 0.4% to 98.7, buoyed by investor reactions to US President Donald Trump's fresh criticism of Federal Reserve Chair Jerome Powell and geopolitical concerns tied to Japan's upcoming election.

Although Asian currencies broadly weakened—shedding 0.1% to 0.4%—the rupee’s decline was modest due to timely dollar inflows. Traders pointed to custodian-driven dollar sales, likely tied to foreign portfolio investment, as key in limiting the rupee’s downside.

The day's volatility in the dollar index added to currency market jitters. It initially dropped on speculation that Powell might be dismissed but pared losses after such rumours were denied.

Domestically, the decline in Indian equities, with the Nifty 50 and Sensex losing about 0.4% each, did little to support the rupee. Nonetheless, regional equity markets traded in positive territory, offering some cushion to risk sentiment.

Investors are now awaiting June US retail sales data and comments from Federal Reserve officials. These events will be closely tracked for their potential impact on Fed policy trajectory, particularly amid mounting pressure from the US administration to ease rates—factors that could further influence the rupee's direction in coming sessions.

Unit	Today	Previous
Dollar/Rupee	86.08	85.94
Dollar Index	98.72	98.31
1-year Dollar/rupee premium (%)	1.97%	1.96%

OUTLOOK
Equity markets are expected to remain range-bound, with the Nifty 50 likely to consolidate around the 25,000–25,300 band. Investors will focus on corporate earnings, particularly from the banking and IT sectors, which could drive sectoral rotations. Sentiment may be restrained by regulatory commentary around derivatives and the potential impact on trading volumes. Midcaps may continue to underperform if earnings disappoint, while stock-specific action is likely in metal and auto counters, supported by favourable domestic policy signals. Foreign flows and domestic institutional support will play a key role in cushioning any major downside.

In the bond market, the benchmark 10-year yield is expected to hover near the 6.30% mark. Softer-than-expected inflation data and the RBI’s projected full-year inflation of below 3.7% have bolstered hopes of at least one more rate cut this year. Traders may begin positioning for this scenario, especially after the recent drop in June CPI to 2.1%. However, upcoming debt supply and RBI’s liquidity withdrawal via reverse repos could limit aggressive buying. Auction results from the Friday bond sale, especially for the five-year note, will provide insight into investor appetite for duration.

The Indian rupee is likely to stay under pressure, especially if the US dollar retains its strength following hawkish cues from the Fed. However, consistent dollar sales by exporters and signs of foreign inflows through custodial banks may offer some support. The rupee could fluctuate in the 85.90–86.20 range in the near term, with external geopolitical and US macro data remaining key influencers.

Key Events & Data Due Friday:
Economic Data

• Germany June PPI Data.
• India Weekly FX Reserves Data
• Japan June Core CPI Data
• US June Housing Starts Data
• US Weekly Baker Hughes Rig Count Data

Corporate Actions

• Earnings: Alkali Metals, Atul, Bandhan Bank, Hatsun Agro Product, Indiamart Intermesh, Indian Overseas Bank, Jayaswal Neco Industries, JSW Steel, Khaitan (India), L&T Finance, Mahindra EPC Irrigation, Mangalore Refinery and Petrochemicals, Mastek, MPS, Ponni Sugars (Erode), Reliance Industries

Policy Events

• Fed Waller Speaks  
• German Buba Mauderer Speaks  
• German Buba President Nagel Speaks