Equities Extend Gains; Rupee Rises On Weak Dollar, Firm Risk Sentiment

HIGHLIGHTS

• Groww files draft IPO papers with SEBI via confidential route
• Edelweiss Group accelerates value unlocking with strategic stake sales and IPO plans
• Gillette India Q3 Results: Stock jumps 10% after strong operational performance
• SC orders status quo on liquidation of Bhushan Power
• PC Jewellers turns profitable, posts March quarter net profit at ₹947.8 million
• RBI will hold ₹250 billion of variable repo rate auction on May 27 

Indian equities extended gains for the second straight session on May 26, led by strength in auto, IT, and metal stocks, even as profit-taking at higher levels capped intraday momentum. After rising nearly 600 points during the session, the Sensex pared some gains but ended in the green, reflecting firm underlying sentiment.

The market found support from positive domestic cues: India becoming the world’s fourth-largest economy and the Reserve Bank of India’s record ₹2.69 trillion surplus transfer to the government. While the dividend fell short of expectations, it still eased fiscal concerns and reinforced confidence in the economy’s macro fundamentals.

Sectoral Performance
Auto and IT sectors were the top performers, with the indices rising over 1% each. Broader gains were seen in realty, metal, FMCG, consumer durables, and energy counters, suggesting renewed risk appetite among investors. Banking stocks lagged slightly but still posted modest gains, with the Nifty Bank and PSU Bank indices ending up 0.16% and 0.13%, respectively.

Among notable movers, JSW Steel rebounded 3% intraday after the Supreme Court called for a status quo in the Bhushan Power & Steel Ltd liquidation case. Meanwhile, defence stocks continued their strong run, with Data Patterns surging 5% and Solar Industries advancing 3%, marking the fourth straight session of gains for the defence sector.

Top Gainers	% Change
NIFTY AUTO	1.05%
NIFTY IT	1.02%
NIFTY FMCG	0.97%
NIFTY METAL	0.94%
NIFTY REALTY	0.76%

Indian government bonds ended higher on Monday, as expectations of further monetary easing outweighed initial disappointment from a lower-than-expected surplus transfer by the Reserve Bank of India. The yield on the benchmark 10-year gilts eased to 6.204%, down from 6.210% in the previous session, reflecting renewed buying interest.

The market opened under pressure after the RBI announced a ₹2.69 trillion surplus transfer to the Centre for 2024-25—higher than last year’s ₹2.11 trillion but below market expectations of over ₹3 trillion. The shortfall, attributed to the RBI raising its Contingent Risk Buffer to 7.5%, trimmed the government’s fiscal headroom and briefly weighed on sentiment.

However, bond prices rebounded as traders shifted focus to the prospect of continued policy support. The upcoming June 6 monetary policy meeting is widely expected to deliver a third consecutive rate cut, reinforcing the bullish outlook for fixed income.

Investor attention is also turning to GDP data due Friday, with consensus estimates pointing to 6.7% growth in the January–March quarter, up from 6.2% in December quarter. 

Shorter-duration bonds remain in demand, reflecting expectations of a steeper yield curve ahead of the policy. Overall, the bond market is likely to remain supported in the near term, driven by dovish policy expectations and a continued search for quality duration.

Tenure	Today	Previous
10-year Gilt	6.20%	6.21%
5-year gilt	5.85%	5.84%
5-year OIS	5.63%	5.63%

The Indian rupee extended its recovery on Monday, marking its second straight session of gains, buoyed by broad weakness in the US dollar and improving sentiment across Asian currencies. The domestic currency closed at 85.09 per US dollar, gaining 13 paise from Friday’s close of 85.22. Intraday, the rupee briefly strengthened to 84.82, crossing the 85-mark for the first time in two weeks.

The recent uptrend in the rupee follows sustained pressure earlier this month, during which the currency had weakened by around 0.65%. Analysts attributed Monday’s gains to a combination of foreign inflows, softer crude prices, and improving regional sentiment.

The US dollar index, which tracks the greenback against six major currencies, slipped 0.1% to 99.01, continuing its downward trend. Market sentiment was further influenced by geopolitical developments, with US President Donald Trump extending the deadline for 50% tariffs on European Union goods until July 9. The delay provided temporary relief to risk assets and emerging market currencies, including the rupee. 

Unit	Today	Previous
Dollar/Rupee	85.09	85.21
Dollar Index	98.94	99.36
1-year Dollar/rupee premium (%)	2.03%	2.06%

OUTLOOK
Equity markets may extend their recent rebound, supported by strong global cues and upbeat domestic sentiment after India’s GDP rankings improvement and the Reserve Bank of India’s record dividend payout. Sectors such as auto, IT, and metals may continue to lead the rally, while broader market strength could persist if global risk appetite holds. However, some profit-booking may emerge at higher levels, especially ahead of month-end adjustments and key macro data.

In the bond market, yields are expected to remain range-bound with a slight downward bias, as traders price in a third straight rate cut in the June 6 monetary policy. Despite the RBI’s surplus transfer falling short of market estimates, the underlying tone in gilts should stay constructive, especially at the shorter end of the curve, where demand remains strong. Investors will also await the GDP print due later this week, which will guide near-term yield movement.

The rupee is likely to trade with a positive bias, buoyed by a softer US dollar and improving risk sentiment in Asia. While dollar demand from importers and FPI flows may cap sharp gains, the rupee could strengthen further if crude prices remain subdued and the dollar index weakens further.

Key Events & Data Due Tuesday:

Economic Data

• US April Core Durable Goods Orders data
• Germany June GfK German Consumer Climate index
• US May Consumer Confidence index

Corporate Actions

• Jan-Mar earnings: Asian Hotels (West), Bartronics India, Bharat Dynamics, Bodal Chemicals, Bosch, Burnpur Cement, Cords Cable Industries, Creative Eye, DCM , Deccan Cements, Delta Manufacturing, EID Parry India, Esab India, Gateway Distriparks, Gujarat Fluorochemicals, Hercules Hoists, ITI, JK Lakshmi Cement, Kalyani Forge, Life Insurance Corporation Of India, Maan Aluminium, Minda Corporation, NMDC, NMDC Steel, Prime Focus, Quality Power Electrical Equipments, Radha Madhav Corporation, Rane (Madras), Rashtriya Chemicals and Fertilizers, Ravi Kumar Distilleries, Reliance Communications, Rico Auto Industries, Sadbhav Infrastructure Project, Sakthi Sugars, V2 Retail, Weizmann, Zuari Industries, 
• Hindustan Copper to consider fund rasing

Policy Events

• FOMC Member Kashkari Speaks
• German Buba President Nagel Speaks