Equities End Lower on Midcap Drag; Rupee Hits Over 2-Month Low

HIGHLIGHTS

• Auto stocks from Maruti to Eicher rise after reports of rare earth deals with Australia 
• IndusInd Bank shares surge 5% after Nomura upgrades, raises target by 50%
• Vedanta confirms selling Hindustan Zinc stake worth ₹30.28 billion
• UGRO Capital to acquire Profectus Capital in ₹14 billion all-cash deal
• BSE shares fall as much as 5% after NSE gets SEBI approval for Tuesday expiry
• MobiKwik shares fall 6%, below IPO price after shareholder lock-in ends

Indian equity benchmarks ended marginally lower on Wednesday, weighed down by persistent volatility and broad-based weakness in midcap stocks. Despite support from financials and select auto majors, the overall sentiment remained cautious as investors reassessed geopolitical risks and awaited clarity on global monetary policy cues.

The Nifty 50 closed with modest losses, while the Sensex also pared early gains. Market breadth tilted sharply in favour of declines, with the advance-decline ratio at 1:2, highlighting pressure in the broader market. The Nifty Midcap 100 index underperformed, falling 270 points, or nearly 0.5%, to close at 58,109, as mid- and small-cap stocks witnessed sustained selling.

Sectoral Performance
Financial stocks offered some stability. The Nifty Bank index bucked the trend, gaining 115 points to end at 55,829. IndusInd Bank led gains on the Nifty, while mid-tier lenders such as RBL Bank, AU Small Finance Bank, and Bandhan Bank rallied 3–5%, driven by optimism over recent credit growth momentum.

Auto stocks continued to outperform, with Maruti Suzuki, Eicher Motors, and Mahindra & Mahindra advancing on hopes of robust festive season demand and signs of rural recovery. The auto index remained one of the brighter pockets in an otherwise subdued session.

Oil marketing companies staged a mild rebound, recovering from initial losses as Brent crude prices eased below $75 per barrel. IOC, BPCL, and HPCL closed higher, reflecting short-term relief on refining margin concerns.

Top Gainers	% Change	Top Losers	% Change
NIFTY CONSUMER DURABLES	0.79%	NIFTY MEDIA	-1.27%
NIFTY PRIVATE BANK	0.39%	NIFTY IT	-0.83%
NIFTY AUTO	0.37%	NIFTY METAL	-0.72%
NIFTY BANK	0.21%	NIFTY HEALTHCARE INDEX	-0.59%
		NIFTY OIL & GAS	-0.48%

Indian government bond yields ended largely flat on Wednesday as traders turned cautious ahead of key central bank signals, even as crude oil prices remained elevated amid persistent geopolitical tensions. The benchmark 10-year gilts yield settled at 6.2615%, marginally lower than the previous close of 6.2646%, indicating a wait-and-watch approach in the market.

Oil prices hovered around $76 per barrel, with Brent crude gaining over 10% in the last four sessions. The sustained rise in crude has heightened concerns about imported inflation in India, given the country’s high dependence on oil imports. Elevated energy costs could limit the scope for further monetary easing from the Reserve Bank of India, which has already flagged upside inflation risks.

Earlier this week, bond yields had briefly softened after RBI Governor Sanjay Malhotra hinted that there could be room for policy manoeuvre if inflation undershoots projections. However, his reassurance that the recent policy stance shift does not signal an imminent tightening failed to sustain a deeper rally in bond prices.

The RBI had delivered a surprise 50 basis points rate cut earlier in June but altered its stance to 'neutral', leading analysts to conclude that the easing cycle may be over for now. Investors will now turn their focus to the minutes of the latest Monetary Policy Committee meeting, scheduled to be released after market hours on Friday, for clarity on the future rate path. 

Tenure	Today	Previous
10-year Gilt	6.26%	6.26%
5-year gilt	5.94%	5.94%
5-year OIS	5.68%	5.69%

The Indian rupee weakened further on Wednesday, ending at 86.4775 against the US dollar, down 0.3% from the previous close of 86.24. This marked its weakest level since mid-March as it breached the key 86.50 threshold, reflecting heightened market anxiety amid ongoing geopolitical tensions.

Persistent dollar demand from corporates, particularly oil importers, and elevated crude prices weighed heavily on the rupee. While Brent crude cooled slightly from recent highs, it still hovered around $75.5 per barrel, keeping import-related dollar buying intact. Traders also flagged speculative pressure and defensive positioning ahead of the US Federal Reserve’s policy decision.

The rupee's slide came amid continued missile exchanges between Iran and Israel, raising fears of supply disruptions through the critical Strait of Hormuz. Additionally, airspace restrictions due to regional conflicts are making trade and transport routes costlier and longer, further fuelling concerns.

Risk-off sentiment dominated Asian markets, with most regional currencies slipping against the greenback, despite a mild dip in the dollar index. The Chinese yuan remained a rare exception. Indian equities also saw FPI outflows, adding pressure on the rupee as foreign investors moved capital to safer assets.

Forward premiums edged higher as importers looked to hedge payments, mainly oil-related.

Unit	Today	Previous
Dollar/Rupee	86.48	86.24
Dollar Index	98.65	98.17
1-year Dollar/rupee premium (%)	1.84%	1.82%

OUTLOOK
Indian equity markets will likely trade with a cautious tone as global uncertainties, particularly the prolonged Israel-Iran conflict, weigh on investor sentiment. Midcap and small-cap stocks may continue to underperform given recent selling pressure, while select large-cap financial and auto names could offer relative stability. Market participants will watch for cues from U.S. and Indian central bank commentary and any geopolitical developments that may sway risk appetite. Defensive sectors like IT and defence may attract safe-haven flows if volatility persists.

Indian government bonds will likely trade range-bound, with the 10-year benchmark yield hovering around the 6.26% level. Elevated crude oil prices could limit any meaningful rally in bonds, especially as imported inflation remains a concern. While RBI’s recent dovish tone has provided some support, further policy easing appears unlikely in the near term. Traders will await Friday’s release of the MPC meeting minutes for clarity on the central bank’s future rate path, which will guide short-term sentiment.

The rupee is expected to remain under pressure amid firm oil prices, foreign institutional outflows, and cautious risk sentiment. The currency may test fresh lows if geopolitical tensions escalate or if dollar demand from oil companies persists. However, RBI intervention could help curb extreme volatility. With a U.S. market holiday and limited dollar liquidity, rupee movement may stay confined within the 86.25–87.00 band in the immediate term, barring fresh global triggers.

Key Events & Data Due Thursday:

Economic Data

• New Zealand March Quarter GDP data
• Australia May employment data

Corporate Actions

• Earnings: Aegis Logistics, Aegis Vopak Terminals 
• Infibeam Avenues to consider fund raising
• Nexus Select Trust to consider fund raising
• Thirumalai Chemicals to consider fund raising

Policy Events

• BoE Interest Rate Decision
• Brazil Interest Rate Decision
• ECB President Lagarde Speaks  
• German Buba Vice President Buch Speaks  
• German Buba President Nagel Speaks  
• ECB's De Guindos Speaks