Equities Snap Losing Streak; Bond Yields Drop Amid Policy Easing Hopes

HIGHLIGHTS

• India better positioned amid global trade turbulence, says Moody’s 
• Trident stock jumps 16% after net profit doubles on lower finance costs
• Aegis Vopak Terminals sets IPO price band at ₹223-235, values at ₹260.38 billion
• KPR Mill shares fall 6% after promoters likely sold 3.2% equity in block trades
• Dixon Technologies shares fall 8% as JM Financial downgrades, cuts target

Indian equity markets rebounded sharply on Wednesday, with benchmark indices halting a three-day losing streak amid broad-based buying. The Nifty 50 reclaimed key levels and the Sensex posted solid gains, led by strength in auto, IT, and pharma stocks. 

Mid- and small-cap indices also ended higher, although they underperformed the frontline benchmarks in the latter half. The Nifty Midcap 100 rose 0.8%, while the Nifty Smallcap 100 added 0.4%, reflecting cautious optimism in the broader market. 

Sectoral Performance
Gains were seen across most sectors, with real estate leading the rally. The Nifty Realty index advanced 1.51%, supported by firm property demand and earnings optimism. Pharma and IT indices followed with gains of 1.10% and 0.70%, respectively, while the Auto index climbed 0.68% amid renewed interest in select names. FMCG, infrastructure, energy, and PSU banks also posted modest gains.

The volatility index, India VIX, rose 2.53%, suggesting nervousness ahead of upcoming global events. The Nifty Bank and Nifty Private Bank indices ended flat with minor positive bias. On the downside, the consumer durables sector lagged, shedding 0.49%, as investors booked profits after recent gains.  

Top Gainers	% Change	Top Losers	% Change
NIFTY REALTY	1.72%	NIFTY CONSUMER DURABLES	-0.49%
NIFTY PHARMA	1.25%
NIFTY HEALTHCARE INDEX	0.83%
NIFTY AUTO	0.72%
NIFTY IT	0.69%

Indian government bond yields declined for the second consecutive session on Wednesday, as investor sentiment stayed supportive amid expectations of further policy easing by the Reserve Bank of India. Bullish momentum among traders helped drive yields lower despite a temporary rise earlier in the day.

The yield on the new 10-year benchmark gilts eased to 6.2062%, down from the previous close of 6.2228%. Traders remained active on the buy side, encouraged by a favorable macroeconomic backdrop and persistent hopes of accommodative monetary policy ahead.

A key focus in the near term is the anticipated dividend transfer from the RBI to the government. Market participants widely expect a record surplus this year, which could further strengthen the fiscal position. Citi has projected the transfer could reach as high as ₹4 trillion, significantly above last year’s payout of ₹2.1 trillion. A larger-than-expected transfer would not only support government spending but could also reduce borrowing pressure in the bond market.

Earlier in the session, Indian yields saw a slight uptick, tracking an overnight rise in US Treasury yields. Global bond markets reacted to concerns that a proposed US tax-cut bill under discussion in Congress might accelerate the pace of fiscal slippage, widening the budget deficit faster than anticipated.

Tenure	Today	Previous
10-year Gilt	6.21%	6.22%
5-year gilt	5.85%	5.90%
5-year OIS	5.63%	5.68%

The Indian rupee ended nearly unchanged on Wednesday, underperforming most of its Asian peers as robust demand for the US dollar from foreign banks offset gains from broader dollar weakness. The local unit settled at 85.6375 per dollar, marginally weaker than its previous close of 85.6350.

Across Asia, most regional currencies advanced between 0.1% to 0.6% as the dollar index slipped to a two-week low, briefly touching 99.6 before stabilizing. The greenback weakened amid mounting concerns over the US fiscal outlook and reduced confidence in progress on trade negotiations, both of which have cast a shadow over US asset appeal.

However, the Indian rupee failed to mirror the performance of its regional counterparts. Market participants attributed the underperformance to persistent demand for dollars from foreign banks, likely acting on behalf of custodial clients and corporates. Traders cited increased corporate dollar payments and possible foreign portfolio outflows as key factors keeping pressure on the rupee.

Unit	Today	Previous
Dollar/Rupee	85.64	85.64
Dollar Index	99.60	100.24
1-year Dollar/rupee premium (%)	2.08%	2.08%

OUTLOOK
Indian equity markets are likely to witness cautious optimism in the coming sessions following Wednesday’s rebound, as benchmark indices snapped a three-day losing streak. Gains in auto, IT, and pharma stocks will likely provide support, although rising volatility—as indicated by a spike in India VIX—may keep investors guarded. Broader markets are expected to continue attracting selective buying, particularly in realty and pharma, while banking stocks may trade sideways due to a lack of strong triggers. With sector rotation in play, defensive sectors like FMCG and pharma could see sustained interest amid global uncertainties.

On the bond front, yields are expected to remain soft, underpinned by continued bullish sentiment and expectations of a dovish policy stance from the Reserve Bank of India. The yield on the 10-year benchmark gilt, which closed at 6.2062%, may drift lower if the RBI announces a record surplus transfer. Such a move would ease government borrowing concerns and further anchor bond market sentiment. 

The Indian rupee is likely to stay range-bound in the near term. Despite weakness in the US dollar index, the rupee may continue to underperform regional peers due to sustained demand for dollars from foreign banks and corporate outflows. Unless foreign inflows strengthen or dollar demand moderates, the rupee’s gains may remain capped, even if the global backdrop remains supportive.

Key Events & Data Due Thursday:

Economic Data

• India May S&P Global provisional PMI data
• US weekly initial jobless claims data
• US May S&P Global provisional PMI data
• US April existing home sales data

Corporate Actions

• Jan-Mar earnings: Aksh Optifibre, Astra Microwave Products, Bharat Gears, Container Corporation of India, Deepak Fertilizers and Petrochemicals Corporation, Dhunseri Tea & Industries, Emami Realty, GMR AIRPORTS, Grasim Industries, Gujarat Industries Power Company, Gujarat State Petronet, HFCL, Hindustan Motors, Honasa Consumer, Hubtown, Indoco Remedies, ITC, Mcnally Bharat Engineering Company, Subros, Sun Pharmaceutical Industries, The Ramco Cements, TV Today Network, and UFO Moviez India 

Policy Events

• BoE MPC Member Pill Speaks
• ECB's Elderson Speaks
• ECB's De Guindos Speaks
• US FOMC Member Williams Speaks
• German Buba President Nagel Speaks