Equities End Higher, Gilt Yields Rise On Weak Demand For State Bonds

HIGHLIGHTS

• Kotak Mahindra Bank shares rise 4% after strong June quarter business update
• Pharma stocks tumble up to 3% amid tariff jitters
• Auto stocks decline up to 2% amid tariff uncertainty
• PC Jeweller sink 9% as exchanges initiate additional surveillance measures
• Navin Fluorine shares hit fresh 52-week high after firm launches ₹750 billion QIP
• Nectar Lifesciences drop 20% after announcing sale of core business
• Belrise Industries surge 10% after Jefferies says 'buy' with strong upside potential

Indian equity benchmarks closed higher on Tuesday, with the Nifty reversing early losses to end near the day’s high, supported by gains in financials and select auto stocks. The index closed above the 25,450 mark, though weakness in pharma and consumer discretionary names limited overall upside.

Kotak Mahindra Bank led the rally, surging over 3% after posting a strong business update for the June quarter. Its performance helped lift the broader banking pack, contributing significantly to the Nifty’s intraday recovery.

On the other hand, Titan Company dragged the index lower, tumbling nearly 6% after its jewellery business reported growth below Street expectations. This made it the worst-performing stock on the index.

Sectoral Performance
Pharma stocks witnessed broad-based selling pressure, triggered by a Macquarie report that lowered price targets on several sector players. Dr. Reddy’s Laboratories was the top loser among large-cap pharma names.

Among autos, Tata Motors ended marginally in the green as Jaguar Land Rover’s quarterly sales numbers aligned with market expectations. Macrotech Developers also pared early losses to close slightly lower, following its June quarter operational update.

Sentiment in capital market-related stocks remained subdued, with BSE Ltd and Angel One under pressure amid reports that SEBI is considering steps to manage volatility in the options segment.

Top Gainers	% Change	Top Losers	% Change
NIFTY REALTY	0.99%	NIFTY CONSUMER DURABLES	-2.29%
NIFTY FINANCIAL SERVICES	0.68%	NIFTY PHARMA	-0.89%
NIFTY PRIVATE BANK	0.66%	NIFTY HEALTHCARE INDEX	-0.89%
NIFTY BANK	0.54%	NIFTY AUTO	-0.38%
NIFTY IT	0.30%	NIFTY FMCG	-0.27%

Indian government bond yields edged higher on Tuesday, as investor sentiment weakened following softer-than-expected demand at a state bond auction and rising US Treasury yields. The 10-year benchmark bond yield closed at 6.3053%, up from 6.2933% in the previous session.

The uptick in yields came despite the market remaining largely rangebound for most of the session, before selling pressure emerged late in the day. States raised ₹133 billion through fresh borrowings, but the cut-off yields came in higher than anticipated, suggesting muted demand from market participants.

Meanwhile, US Treasury yields extended gains for the second straight session in Asian trading, following President Donald Trump’s tariff announcement. The US will impose a 25% levy on imports from Japan and South Korea starting August 1, reigniting concerns over global trade friction and reducing appetite for emerging market debt.

The US 10-year yield rose further after June jobs data showed stronger-than-expected hiring, prompting traders to trim expectations of aggressive rate cuts by the Federal Reserve in the near term.

Back home, traders continue to monitor signals from the Reserve Bank of India on liquidity operations. The overnight interbank call money rate has slipped below the policy corridor’s floor, indicating persistent liquidity surplus in the system. Market participants remain cautious, awaiting the RBI’s next move to manage the excess liquidity, which could influence short-term bond yields further.

Tenure	Today	Previous
10-year Gilt	6.31%	6.29%
5-year gilt	5.96%	5.95%
5-year OIS	5.71%	5.68%

The Indian rupee ended higher on Tuesday, mirroring strength in regional currencies, as markets brushed aside concerns over tariff notices from the White House and focused instead on the extended deadline for potential trade deals. The rupee settled at 85.6950 per US dollar, appreciating 0.2% from Monday’s close of 85.85.

While US President Donald Trump sent tariff letters to 14 trade partners on Monday, including a proposed 25% levy on South Korean imports, investor response remained measured. Asian currencies and equities rebounded, with the Korean won climbing 0.7% and the KOSPI 200 rallying nearly 2%—its best performance in two weeks.

Indian benchmark equity indices also posted modest gains, lending support to the rupee. However, while equities have broadly tracked the region’s performance since reciprocal tariffs were announced in early April, the rupee has underperformed most emerging market peers despite persistent dollar weakness.

Traders pointed to moderate dollar sales by local banks as an additional factor supporting the currency on the day. A dealer at a private bank noted that positive cues from the broader region underpinned sentiment, though the rupee continues to face resistance near the 85.65–85.70 zone.

Market participants expect the rupee to trade in a narrow range in the near term, with gains capped unless a US-India trade deal materialises. If such a deal is announced, it could help the rupee strengthen toward the 85 mark, especially if accompanied by renewed foreign inflows and steady central bank intervention.

Unit	Today	Previous
Dollar/Rupee	85.70	85.39
Dollar Index	97.39	96.58
1-year Dollar/rupee premium (%)	1.96%	2.02%

OUTLOOK
Equity markets are likely to trade with a cautious bias in the coming sessions amid lingering global uncertainties and mixed domestic signals. In equities, the Nifty 50 may witness a consolidation phase around the 25,400–25,600 zone, with stock-specific action continuing to dominate. Financial stocks, particularly private banks, could support the index after positive business updates, while weakness may persist in select consumer discretionary and pharma names following muted quarterly performance and downgrades. 

In the bond market, Indian government securities are expected to remain under pressure amid weaker-than-expected demand in recent state debt auctions and rising US Treasury yields. The benchmark 10-year bond yield could hover in the 6.28%–6.33% band, with further upward movement likely if global yields continue to rise or if demand at Friday’s central government bond auction disappoints. 

For the rupee, near-term direction will hinge on global risk appetite and further developments on US tariffs. A confirmed trade agreement with the US may support the rupee and push it towards the 85.40–85.20 zone. However, any resurgence in dollar demand or risk-off sentiment globally could cap gains. Dollar buying by the RBI or corporate flows may also limit appreciation. In the absence of fresh positive triggers, the rupee is expected to trade in a narrow range of 85.20 to 85.80 in the coming days.

Key Events & Data Due Wednesday:
Economic Data

• US API Weekly Crude Oil Stock
• China June CPI Data
• US Crude Oil Inventories Data
• US Cushing Crude Oil Inventories
• AMFI June Data

Corporate Actions

• Earnings: Burnpur Cement, GACM Technologies, Supreme Infrastructure India, GACM Technologies
• Teamo Productions HQ to consider fund raising

Policy Events

• RBNZ Interest Rate Decision
• BoE Financial Stability Report  
• German Buba President Nagel Speaks  
• US FOMC Meeting Minutes