Equities, Rupee End Flat; Bond Yields Hit Over 3-Year Low

HIGHLIGHTS

• ITC shares sink 3% as BAT offloads 2.5% equity in a block deal
• Govt raises paddy MSP by ₹69 to ₹2,369 per quintal for 2025-26
• Hero FinCorp gets SEBI nod for ₹36.68 billion IPO
• Apollo Micro Systems surges 11% on ₹1.14 billion export order
• NMDC shares slip 2% after profit falls 22% in March quarter
• Shree Cement shares drop over 3% on tax demand notice of ₹5.89 billion

Indian equity benchmarks ended slightly lower on Wednesday in a subdued session marked by selective sectoral moves. Weakness in FMCG major ITC and metal stocks weighed on the indices, while late buying in financials and strong earnings from Life Insurance Corporation of India helped limit the downside.

The Sensex and Nifty spent much of the day moving within a tight range, reflecting investor caution ahead of key macroeconomic data. The broader market was mixed—while the Nifty Midcap index slipped into negative territory, the Smallcap index managed to outperform, supported by improved earnings visibility in select sectors.

Sectoral Performance
PSU banks emerged as the top-performing pack, with SBI, Bank of Baroda, and PNB posting gains and lifting the Nifty PSU Bank index. On the other hand, FMCG stocks dragged, primarily due to a sharp selloff in ITC. The stock saw a massive block trade, with nearly 385 million shares—or about 3% of its equity—changing hands on the NSE. The deal brought British American Tobacco’s stake in ITC below the 25% mark, hinting at reduced boardroom control.

In metals, NMDC dropped 2% after missing March quarter estimates. The company reported lower-than-expected EBITDA and margin pressure, disappointing the Street.

LIC, however, stole the spotlight. Shares of the state-owned insurer surged over 7% after it posted robust fourth-quarter earnings. The results offered reassurance to investors concerned about profitability and underwriting efficiency, triggering a sharp rally in the stock.

Top Gainers	% Change	Top Losers	% Change
NIFTY MEDIA	1.04%	NIFTY FMCG	-1.49%
NIFTY PSU BANK	0.97%	NIFTY AUTO	-0.68%
NIFTY BANK	0.12%	NIFTY HEALTHCARE INDEX	-0.66%
NIFTY FINANCIAL SERVICES	0.12%	NIFTY PHARMA	-0.61%
		NIFTY METAL	-0.60%

Indian government bonds extended their rally on Wednesday, with the benchmark 10-year yield slipping to its lowest level in over three-and-a-half years amid mounting expectations of further monetary policy easing by the Reserve Bank of India. 

The yield on the 10-year benchmark gilts settled at 6.1743%, down from 6.2032% in the previous session, breaking below the key 6.20% psychological level.

The bond market sentiment remains broadly supportive, driven by hopes that the central bank will deliver a third consecutive 25-basis-point rate cut at its policy meeting scheduled for June 6. The RBI’s cumulative liquidity injection of nearly ₹8.5 trillion between December and May has also helped anchor yields at lower levels.

Traders speculated that the central bank could announce additional liquidity-enhancing steps to support the ongoing economic recovery. This pushed yields on short-term treasury bills further below the policy rate corridor, signaling strong demand in the money markets for quality sovereign assets.

Tenure	Today	Previous
10-year Gilt	6.17%	6.20%
5-year gilt	5.83%	5.84%
5-year OIS	5.63%	5.62%

The Indian rupee ended slightly lower on Wednesday, marking its second straight session of losses, as strength in the US dollar and persistent month-end importer demand pressured the local currency. The rupee closed at 85.36 against the US dollar, down 2 paise from the previous close of 85.34. It had opened sharply weaker at 85.63 amid early dollar demand before trimming losses through the day.

So far in May, the rupee has depreciated around 1.2%, giving back gains from the past two months. Traders attributed the weakness to dollar buying by oil importers and corporates, alongside global cues favoring the greenback.

The US dollar found renewed strength after data showed a sharp rebound in US consumer confidence in May, recovering from a near five-year low. This shift revived investor interest in dollar-denominated assets, bolstering the greenback globally. The dollar index, which tracks the currency against a basket of six major peers, edged up to 99.53, though it remains over 8% lower for the year amid ongoing concerns around US trade policy and fiscal stability.

Unit	Today	Previous
Dollar/Rupee	85.36	85.34
Dollar Index	99.49	99.42
1-year Dollar/rupee premium (%)	2.04%	2.01%

OUTLOOK
Equities are likely to open on a firm note, supported by resilient corporate earnings and selective buying in large-cap financials and PSU stocks. However, volatility could persist, particularly in FMCG and metal counters, where recent institutional activity and profit-taking may limit upside. Broader markets, especially small-cap and select mid-cap stocks with strong earnings visibility, are expected to attract continued investor interest. With India VIX elevated, intraday swings are likely, especially ahead of the crucial GDP release on Friday.

In the bond market, yields are expected to trend lower as the Reserve Bank of India’s June 6 policy meeting draws closer. The benchmark 10-year yield may fall further amid expectations of another 25-basis-point rate cut. Market participants will also remain alert to any liquidity-supportive announcements from the central bank. Anticipation around Friday’s GDP data—estimated at 6.7% growth for January–March—could influence yield direction in the near term.

The Indian rupee may open on a muted note after a modest two-day decline, weighed by month-end dollar demand from importers and a stronger greenback. However, if crude oil prices remain stable and dollar index gains stay capped, the rupee could stabilise near 85.30 levels. Traders will keep an eye on global cues, especially US data releases, for further direction as the currency looks to close the month with modest losses.