Equities Rebound; Bond Yields Ease On Value Buying

HIGHLIGHTS

• HDFC Bank shares gain after reports HDB Financial IPO by June-end
• India's trade deficit narrows to $21.88 billion in May
• Tata Motors fall 5% after JLR sees lower margins for FY26 from last year
• Biocon plans to launch QIP shortly to raise up to ₹45 billion
• Omaxe jump over 11% after announcing ₹100 million investment in Amritsar township

Indian equities kicked off the week with a strong rebound on Monday, recovering previous session losses as broad-based buying lifted key indices. The Nifty 50 closed higher, supported by gains in financials, energy, and midcap stocks amid improved global sentiment and value buying in key sectors.

The Nifty Bank index rose by 418 points to 55,945, with both private and public sector lenders contributing to the gains. Broader markets outperformed headline indices, with the Nifty Midcap 100 surging 541 points to 58,769, rebounding more than 1,000 points from intraday lows.

Market breadth was positive, with 46 of the 50 Nifty components closing in the green. Reliance Industries and major banking names were among the top contributors to index gains.

Sectoral Performance
All major sectoral indices ended in the green, with banking, FMCG, capital goods, IT, realty, metals, and oil & gas rising between 0.5% and 1%. Insurance stocks outperformed, as SBI Life, HDFC Life, and Max Financial gained 2–3% on renewed investor interest.

Indraprastha Gas Ltd jumped over 6% on reports that the Delhi government may ease electric vehicle policy norms, potentially benefiting gas distribution companies.

Oil marketing companies recovered from early losses after Brent crude slipped below $74 per barrel. HPCL rose nearly 3%, while IOC and BPCL also ended higher.

Top Gainers	% Change
NIFTY IT	1.57%
NIFTY REALTY	1.32%
NIFTY OIL & GAS	1.11%
NIFTY METAL	1.07%
NIFTY PRIVATE BANK	0.86%

Indian government bond yields declined on Monday, snapping a recent upward trend, as investors took advantage of elevated yield levels to accumulate long-dated securities. The benchmark 10-year gilts yield settled at 6.2732%, down from 6.2996% in the previous session. This followed a 6 basis points rise last week—the steepest weekly jump since December 20.

The pullback in yields was driven by value buying, even as traders continued to monitor geopolitical developments in West Asia. Although Israel and Iran exchanged military strikes over the weekend, oil production and export infrastructure remained unaffected, limiting the immediate impact on global crude supply.

Brent crude prices had surged to $78.50 per barrel on Friday before easing to $74.23, still marking a 7% weekly gain. While the retreat in crude prices offered temporary relief, markets remain cautious amid fears of broader regional escalation that could impact oil shipments and stoke inflationary pressures in importing nations like India.

Rising energy prices pose a risk to India’s inflation trajectory, which had shown signs of moderation in May. Bond yields had previously spiked after the Reserve Bank of India unexpectedly cut rates by 50 basis points on June 6 but simultaneously shifted to a "neutral" policy stance, suggesting limited room for further easing.

Tenure	Today	Previous	% Change
10-year Gilt	6.27%	6.30%	0.84%
5-year gilt	5.96%	5.99%	0.92%
5-year OIS	5.73%	5.76%	0.93%

The Indian rupee ended nearly flat on Monday at 86.0650 against the US dollar, compared to 86.08 in the previous session, after a choppy trading session marked by conflicting global cues. The rupee traded in a narrow 85.9525–86.23 band during the day.

Initial weakness in the rupee was driven by persistent dollar demand from foreign portfolio investors and oil companies, as concerns around the ongoing Israel-Iran conflict continued to keep risk sentiment subdued. Dollar buying intensified near intraday lows, particularly as oil prices remained elevated due to geopolitical uncertainty. Iran’s threat to exit the non-proliferation Treaty added to market caution.

However, a broad-based decline in the US dollar helped limit losses. The dollar index fell 0.30% to 97.90, tracking weakness in US data and a slight rebound in some Asian currencies, such as the offshore Chinese yuan. The rupee’s trajectory was also influenced by exporter hedging activity and RBI’s possible intervention above the 86.20 level.

Meanwhile, dollar-rupee forward premiums slipped, with the 1-year implied yield down 5 basis points to 1.83%, mirroring rising short-term US Treasury yields and exporter activity.

On the macro front, India’s merchandise trade deficit narrowed to $21.88 billion in May from $26.42 billion in April, as imports moderated. While the improved trade data offered some support to the rupee, uncertainty around West Asia tensions and high oil prices is likely to weigh on near-term sentiment.

Unit	Today	Previous
Dollar/Rupee	86.07	86.08
Dollar Index	97.96	98.31
1-year Dollar/rupee premium (%)	1.84%	1.89%

OUTLOOK
Indian equities are expected to see cautious gains in the coming sessions, supported by sectoral rotation and selective buying in financials, midcaps, and energy stocks. Investors will likely remain sensitive to global cues, particularly developments in West Asia and crude oil price fluctuations. With domestic inflation under control and corporate earnings broadly stable, equity markets could maintain upward momentum, though any escalation in geopolitical tensions may trigger profit-taking, especially in crude-sensitive and aviation stocks.

In the bond market, yields are anticipated to remain rangebound but biased downward as investors take advantage of elevated yield levels for value purchases. The recent fall in the 10-year bond yield, after touching a multi-week high, indicates renewed interest from long-term buyers. However, persistent concerns over oil prices and their potential inflationary impact could limit the extent of yield softening. Traders will closely monitor global energy trends and domestic macro data for clues on future RBI action, though the central bank is likely to stay on hold following its recent policy shift to neutral.

The rupee is likely to stay under pressure in the near term amid lingering global risk aversion, dollar demand from corporates, and concerns over India's current account dynamics. While RBI intervention may help curb excessive volatility, the local currency’s relative underperformance compared to regional peers may persist unless crude oil prices stabilize and foreign inflows improve.

Key Events & Data Due Tuesday:

Economic Data

• German ZEW June economic sentiment index
• US May retail sales data
• US May industrial production data

Corporate Actions

• Earnings: Ballarpur Industries, Orissa Minerals Development Co

Policy Events

• Bank of Japan interest rate decision