Nifty Holds 24,700; Bond Yields Ease Ahead Of RBI Policy Decision

HIGHLIGHTS

• Vodafone pushes for tariff hikes, says engaging with lenders for debt funding
• PSU bank shares rise up to 6% on rate cut hopes
• Metal shares down as Trump threatens 50% tariffs on steel imports

Indian equity benchmarks closed lower on June 2 but recovered sharply from intraday lows, reflecting resilience amid global uncertainty. The Nifty 50 managed to hold above the 24,700 mark, supported by late buying in select sectors despite early weakness triggered by geopolitical concerns and trade-related tensions.

The BSE Sensex and NSE Nifty both slipped in early trade, dragged by weakness in metal and IT shares, after the United States announced a doubling of tariffs on steel and aluminium to 50%, reigniting fears of trade disruption. However, a second-half rebound led by FMCG, PSU banks, and realty stocks helped the indices pare losses and close near session highs.

Sectoral Performance
Sectoral performance was mixed. Metal stocks bore the brunt of tariff news, with heavyweights like JSW Steel and Tata Steel slipping, pulling the broader index lower. The IT sector also ended in the red amid profit-booking. On the positive side, PSU banks and realty stocks posted strong gains, each rising around 2%, underpinned by robust institutional buying and sectoral optimism. The Nifty Bank index continued to hover near record highs, led by strength in public sector lenders.

Among the notable performers, Adani Ports, M&M, Tata Consumer, and Power Grid Corp registered healthy gains. In contrast, Hero MotoCorp, Tech Mahindra, and HDFC Life were among the key laggards.

Top Gainers	% Change	Top Losers	% Change
NIFTY REALTY	2.31%	NIFTY IT	-0.70%
NIFTY PSU BANK	2.15%	NIFTY METAL	-0.70%
NIFTY FMCG	0.81%	NIFTY CONSUMER DURABLES	-0.48%
NIFTY PRIVATE BANK	0.34%	NIFTY PHARMA	-0.22%
NIFTY MEDIA	0.32%	NIFTY OIL & GAS	-0.21%

Indian government bond yields edged lower on Monday, retracing some of Friday’s spike triggered by stronger-than-expected GDP data. The market’s focus now shifts squarely to the Reserve Bank of India’s upcoming monetary policy decision, scheduled for June 6.

The yield on the benchmark 10-year gilts eased to 6.2144%, compared with 6.2308% in the previous session, when it had jumped by 5 basis points following the upbeat economic data. Similarly, the 6.75% 2029 bond settled at 5.8467%, down from 5.88%.

The moderation in yields suggests investors are anticipating further policy support, despite the economy's robust showing. India’s GDP expanded by 7.4% in the January–March quarter, well above the 6.7% consensus forecast and an improvement over the 6.4% growth recorded in the previous quarter. The strength in output has raised questions about the pace of monetary easing, but market sentiment remains tilted towards continued accommodation.

Traders widely expect the RBI to deliver a third consecutive 25-basis-point rate cut at the June policy meeting. The central bank is also seen maintaining a dovish tone, especially amid global uncertainties and persistent disinflationary trends.

Tenure	Today	Previous
10-year Gilt	6.21%	6.23%
5-year gilt	5.86%	5.88%
5-year OIS	5.66%	5.68%

The Indian rupee strengthened on Monday, beginning the week on a firmer footing amid a weaker US dollar and modest foreign inflows. The local currency settled at 85.3825 per dollar, appreciating by 0.23% from the previous close.

Traders attributed the rupee’s gains to inflows tied to a global equity index rebalancing, which supported demand for domestic assets. These inflows, coupled with a broad-based decline in the US dollar, lent strength to the rupee during early trading hours.

The dollar index slipped below the 99 mark, pressured by renewed concerns over global trade tensions. This followed comments by US President Donald Trump, who accused China of violating a mutual tariff rollback agreement. Trump further announced plans to double import duties on steel and aluminium starting Wednesday.

Despite the move, Indian authorities have downplayed the impact, with the Union Steel Minister stating that the country anticipates only a "minor impact" from the higher tariffs on its steel and aluminium exports.

Unit	Today	Previous
Dollar/Rupee	85.38	85.58
Dollar Index	98.78	99.26
1-year Dollar/rupee premium (%)	1.98%	1.99%

OUTLOOK
Equities may continue to witness volatility in select segments and pressure from global uncertainties. The Nifty 50, having defended the 24,700 level, could see renewed buying in FMCG, PSU banks, and realty stocks, particularly if domestic institutional flows remain supportive. However, headwinds are likely in metal and IT sectors, especially after the US decision to double tariffs on steel and aluminium, which may weigh on export-oriented companies like JSW Steel and Tata Steel. Mid and small-cap stocks may retain investor interest due to better earnings visibility.

On the bond market front, government securities may remain firm ahead of the RBI’s June 6 policy decision, where a third consecutive 25-bps rate cut is widely anticipated. The benchmark 10-year yield could soften further if the central bank not only cuts rates but also signals additional liquidity support. The recent strong GDP print may temper expectations slightly, but the broader sentiment is still tilted toward easing.

The Indian rupee may consolidate with a slight positive bias. Dollar inflows related to global index rebalancing and a weaker US dollar may provide short-term support. However, lingering trade tensions, especially around US–China tariffs, could cap gains.

Key Events & Data Due Tuesday:

Economic Data

• China May Caixin manufacturing PMI
• Eurozone May core CPI
• US May factory orders data
• US April JOLTS job openings data

Corporate Actions

• Ethos to consider fund raising
• YES Bank to consider fund raising

Policy Events

• BoE MPC Member Mann speaks