Equities, Bonds, Rupee All in Red Ahead of Fed Meet

HIGHLIGHTS

• Industrial output rises to 1.5% in June as manufacturing picks up
• IndusInd Bank Beats profit, NII estimates; NPAs rise even as slippages moderate
• Revamp of IPO regulations coming, as SEBI sets up panel to review ICDR regulations
• CP Gurnani says Indian IT must move beyond headcount
• Kotak Mahindra Bank’s net interest margin falls to 14-quarter low
• Adani Green net profit rises 31% on-year, revenue up 36%; shares surge

Indian equity markets extended their losing streak on Monday, with the Nifty falling for a third consecutive session to close at its lowest level in nearly two months. The decline was led by large-cap IT and financial stocks, as weak earnings and cautious management guidance weighed on sentiment.

Sectoral Performance
IT majors came under pressure after Tata Consultancy Services (TCS) announced job cuts, sparking concerns about broader demand softness and margin headwinds across the sector. The negative sentiment spilled over to realty stocks, which also saw declines amid underwhelming earnings.

In the financial space, Kotak Mahindra Bank tumbled 8%, wiping out over ₹30,000 crore in market value after delivering a disappointing June-quarter performance. The stock’s sharp fall contributed significantly to the Nifty's overall weakness. Bajaj Finance extended its losses from Friday, slipping nearly 4% as its cautious tone on growth and asset quality dampened investor confidence. IndusInd Bank also ended lower by almost 3% ahead of its results, reflecting pre-earnings nervousness.

Overall market sentiment remained fragile, with earnings disappointments and weak global cues dominating trading direction. While select stocks attracted bargain hunting, persistent pressure in index heavyweights kept the broader trend negative, reinforcing caution among investors heading into the peak earnings season.

Top Gainers	% Change	Top Losers	% Change
NIFTY PHARMA	0.43%	NIFTY REALTY	-4.07%
NIFTY FMCG	0.28%	NIFTY MEDIA	-2.70%
NIFTY HEALTHCARE INDEX	0.09%	NIFTY PRIVATE BANK	-1.65%
		NIFTY PSU BANK	-1.20%
		NIFTY METAL	-1.15%

Indian government bonds extended their losing streak for a fifth straight session on Monday, as traders tempered expectations of a near-term rate cut following remarks from Reserve Bank of India Governor Sanjay Malhotra. The benchmark 10-year bond yield rose to 6.3700%, up from 6.3505% on Friday, marking a 7 basis point increase over the last five sessions.

Malhotra signalled in a recent interview that future monetary decisions will focus more on inflation and growth outlooks rather than current readings, suggesting a higher threshold for further easing. His comments have prompted a reassessment among bond traders who were earlier betting on a rate cut due to the recent moderation in inflation.

Market participants now broadly expect the RBI to maintain status quo on August 6, when it delivers its next policy decision. A Reuters poll of economists supports this view, citing limited space for easing amid a neutral policy stance.

Globally, traders are also keeping an eye on the Federal Reserve’s decision expected this Wednesday, though the US central bank is widely forecast to hold rates steady. Until clarity emerges on both domestic and global policy fronts, bond yields are likely to remain rangebound with a mild upward bias. 

Tenure	Today	Previous
10-year Gilt	6.37%	6.35%
5-year gilt	6.03%	6.03%
5-year OIS	5.74%	5.73%

The Indian rupee weakened on Monday, pressured by month-end dollar demand from importers, even as it remained relatively insulated from global dollar strength due to a lack of large capital outflows. The rupee settled at 86.6650 against the US dollar, marking a 0.2% decline from its previous close of 86.5150.

Initially showing some strength, the rupee reversed course as the session progressed, mirroring the uptick in the dollar index. Traders attributed the currency's recent moves largely to flow-based factors, particularly foreign portfolio activity and importer hedging, rather than broader risk sentiment.

The currency found technical support around the 86.60 level, where state-run banks were seen absorbing dollar demand. Regional currencies also showed mild weakness, with the offshore Chinese yuan slipping 0.1%.

Domestic equity benchmarks ended lower, with the Sensex and Nifty falling 0.7% and 0.63%, respectively, in contrast to modest gains in most Asian and European markets. Meanwhile, India’s benchmark 10-year bond yield inched up to 6.3603%, reflecting market caution ahead of major global events.

The rupee’s near-term trajectory will likely hinge on global cues, including the upcoming Federal Reserve policy decision and key US economic data. Markets are currently pricing in a rate cut by the Fed in September.

Unit	Today	Previous
Dollar/Rupee	86.67	86.52
Dollar Index	98.17	97.68
1-year Dollar/rupee premium (%)	2.06%	2.04%

OUTLOOK
Equities are expected to remain under pressure as investors continue to digest disappointing earnings from key large-cap companies. Weakness in IT and financial stocks may persist, particularly after job cut announcements and muted management guidance from industry leaders. Midcaps and realty may underperform, while consumer-focused and select industrial stocks could offer some support. Market sentiment will likely hinge on upcoming corporate results and global risk appetite, with traders closely watching developments around US-India trade talks and the Federal Reserve’s interest rate guidance.

Bond markets may stay rangebound in the near term as traders await the Reserve Bank of India’s policy decision on August 6. The sharp drop in inflation has raised speculation of a rate cut, but recent commentary from RBI Governor has tempered those expectations. Tight banking liquidity, driven by tax-related outflows, may keep short-term yields elevated. Demand at upcoming debt auctions and clarity on the Fed’s policy stance will be key for yield direction.

The rupee could stay under pressure amid foreign portfolio outflows and rising dollar demand from importers. While support around 86.60 is expected to hold in the near term, a stronger dollar and lack of a trade resolution with the US may weigh further. Traders will track global currency trends, India’s export prospects, and dollar inflows via equity and bond channels. The rupee’s short-term movement will remain flow-driven, with any sharp shifts in global risk sentiment or dollar strength having immediate impact.

Key Events & Data Due Tuesday:
Economic Data

• US June Provisional Trade Data 
• US June JOLTS Job Openings Data

Corporate Actions

• Earnings: Arvind, Bank of IndiaBharat Gears, Blue Dart Express, Deepak Fertilizers and Petrochemicals Corporation, Dilip Buildcon, Gabriel India, Gateway Distriparks, GMR AIRPORTS, Greenply Industries, HeidelbergCement India, J.Kumar Infraprojects, Kolte - Patil Developers, Larsen & Toubro, Nilkamal, NTPC, Piramal Enterprises, The New India Assurance Company, Welspun Corp, Zee Media Corp
• Tilaknagar Industries to consider fund raising

Policy Events

• US FOMC two-day meeting starts