Stocks Rise As Effects Of Rate Cut Linger; Bond Yields Up As Stance Shift Spoils Party

HIGHLIGHTS

• Wipro shares rise after equity worth ₹50.57 billion changes hands
• Kalpataru Projects surge 5% after winning ₹37.89 billion order
• L&T bags order worth up to ₹25 billion order from JSW Energy for heavy civil infra unit
• Olectra Greentech chairman and MD KV Pradeep resigns citing personal reasons

Indian equities extended their winning streak to a fourth straight session on Monday, with the Nifty 50 closing at an eight-month high of 25,160 intraday, driven by broad-based buying and continued momentum in banking and financial stocks. The rally followed the Reserve Bank of India's sharper-than-expected 50-basis-point rate cut announced last week, which continued to buoy investor sentiment across interest rate-sensitive sectors.

The Nifty Bank index hit a new record high of 57,049.50 before ending 0.5% higher, supported by gains in large private lenders. Most sectoral indices closed in the green, with IT, oil & gas, power, and PSU Bank indices rising around 1% each. Realty stocks, however, underperformed, slipping in an otherwise strong session.

Sectoral Performance
Among financials, gold loan companies saw robust buying interest, rallying between 4% and 8% after the RBI eased lending norms for gold-based loans. The move is expected to accelerate credit disbursement in the segment.
Life insurers also found support, with HDFC Life and Max Life gaining after reporting stronger-than-expected new business performance for May, indicating resilience in demand despite broader macroeconomic uncertainties. Overall, rate-sensitive sectors remained at the forefront of the rally.

Top Gainers	% Change	Top Losers	% Change
NIFTY PSU BANK	1.52%	NIFTY REALTY	-0.14%
NIFTY OIL & GAS	1.04%
NIFTY PRIVATE BANK	1.03%
NIFTY IT	1.00%
NIFTY HEALTHCARE INDEX	0.78%

Indian government bond yields rose for a second straight session on Monday, as bond traders continued to react to the Reserve Bank of India's unexpected shift to a "neutral" policy stance, despite delivering a steep 50-basis-point rate cut last Friday—its largest in five years.

The benchmark 10-year gilts yield climbed to 6.2837%, up from 6.2373% in the previous session and marking its highest level since May 13. Meanwhile, the five-year 6.75% 2029 bond yield increased to 5.8842%, from 5.8150% on Friday. The yield spike reflected investor caution over the central bank's indication that further rate cuts may be limited, even as it frontloaded easing to support growth.

The RBI has now reduced policy rates by a total of 100 basis points in 2025. While the central bank also slashed the cash reserve ratio by 100 basis points to 3%, infusing ₹2.5 trillion into the banking system, the policy shift led traders to favour short-duration bonds and swaps.

Market participants now expect investors to realign portfolios toward shorter maturities, where the benefit of increased liquidity will be more immediate, while avoiding longer tenors due to uncertainty over the RBI’s future rate trajectory. 

Tenure	Today	Previous
10-year Gilt	6.28%	6.24%
5-year gilt	5.88%	5.82%
5-year OIS	5.70%	5.68%

The Indian rupee ended marginally stronger on Monday, supported by a weaker US dollar ahead of crucial trade talks between top US and Chinese officials in London. The local unit tracked the subdued movement in most Asian peers and closed slightly higher, though gains remained limited by persistent capital outflows.

Despite the dollar's broader weakness—down nearly 8.5% against major global currencies so far this year—the rupee has shown little change over the same period. 

Analysts attributed this underperformance to tepid foreign capital inflows and subdued demand for dollar-hedging strategies from domestic participants.

Foreign institutional investors have remained net sellers of Indian equities, offloading about $11.6 billion worth of stocks year-to-date, which has weighed on rupee sentiment. In contrast, several Asian peers have benefited more directly from the dollar’s slide, buoyed by stronger capital inflows and economic resilience.

The ongoing uncertainty surrounding US trade policy has kept the global dollar sentiment weak, but Indian currency markets remain cautious. Traders now await further clarity from the outcome of the US-China trade negotiations and the Reserve Bank of India’s evolving policy stance, both of which could influence the rupee's trajectory in the near term.

Unit	Today	Previous
Dollar/Rupee	85.62	85.63
Dollar Index	98.87	99.14
1-year Dollar/rupee premium (%)	1.79%	1.83%

OUTLOOK
Equities are expected to extend their gains, led by rate-sensitive sectors such as banking, NBFCs, and real estate. Investors may continue favouring large-cap financials and gold loan financiers, which saw strong buying after the RBI eased norms for gold-backed lending. Positive life insurance business updates may also attract flows into select private insurers.

On the debt front, short-duration government bonds will likely remain in demand, benefiting from the central bank’s dovish action. However, long-term bonds could stay under pressure amid uncertainty over further easing, following the RBI’s shift to a “neutral” stance. Traders will closely watch bond supply dynamics and the pace of liquidity infusion via the phased CRR cut, with benchmark 10-year yields expected to stay in the 6.20–6.30% range.

In the currency market, the rupee may trade with a slight appreciation bias, helped by dollar softness and improved equity sentiment. However, heavy foreign fund outflows seen so far in 2025 and low hedge demand may limit gains. Traders will monitor US macro data and global risk appetite, with 85.40–85.80 likely to act as the near-term trading band for the rupee.

Key Events & Data Due Tuesday:

Economic Data

• AMFI May data
• UK April employment data

Corporate Actions

• Jan-Mar Earnings: Borana Weaves, Supreme Infrastructure India, Orissa Minerals Development Co
• BEML to consider dividend
• CEAT to consider fund raising
• IIFL Finance to consider fund raising

Policy Events

• EIA short-term energy outlook 
• German Buba Vice President Buch speaks