Rupee, Bonds Cheer Soft CPI; Stocks Mixed Amid Selective Buying

HIGHLIGHTS

• Real estate shares rise up to 5% on rate cut hopes as inflation eases to six-year low
• PSU oil cos end 2% higher as JPMorgan sees massive upside to 2025-26 earnings
• Garden Reach shares soar 18%, touch 10-month high as profit doubles in March quarter
• HBL Engineering shares surge 6% after getting regulatory approval for Kavach Systems 4.0
• Muthoot Finance's net profit rises 43% to ₹15.08 billion.

Indian equities ended modestly higher on Wednesday, with broader market strength and a rally in defence stocks offsetting pressure in banking shares. The Nifty50 closed with marginal gains after a volatile session, unable to sustain early momentum as banking and financial stocks underperformed. The Nifty Bank index slipped into the red, reflecting continued caution in rate-sensitive counters.

In contrast, the broader market outperformed significantly. The BSE Midcap index rose 1%, while the BSE Smallcap index advanced 1.6%, driven by stock-specific action and renewed risk appetite. Defence stocks remained the highlight of the day, surging up to 15% amid sustained investor interest and optimism following strong quarterly results. Hindustan Aeronautics led the charge after posting robust March-quarter earnings.

Sectoral Performance
All sectoral indices except banks closed in the green. Real estate, oil & gas, telecom, media, IT, and metals saw gains in the range of 1–2.5%, providing crucial support at lower levels. Capital goods, PSU banks, and pharma stocks also contributed to the rally, advancing between 1% and 1.6%.

Despite mixed global cues and profit booking in select blue-chips, market breadth remained positive, underlining investor confidence in the broader recovery. With geopolitical tensions easing and domestic earnings season progressing, investors appeared to rotate out of heavyweight financials and into sectors tied to infrastructure, defence, and technology.

Top Gainers	% Change	Top Losers	% Change
NIFTY METAL	2.46%	NIFTY BANK	-0.25%
NIFTY REALTY	1.70%	NIFTY FINANCIAL SERVICES	-0.23%
NIFTY IT	1.34%	NIFTY PRIVATE BANK	-0.19%
NIFTY MEDIA	1.27%
NIFTY OIL & GAS	1.22%

Indian government bonds ended higher on Wednesday, buoyed by sustained buying from banks and mutual funds amid a supportive macroeconomic backdrop and easing geopolitical concerns. The yield on benchmark 10-year government gilts declined by 4 basis points to 6.2398%, retreating from Tuesday’s close of 6.2792%, reflecting improved investor sentiment.

A key driver for the rally was the release of benign inflation data. India’s consumer price index inflation for April eased to 3.16%, marking its lowest level in nearly six years. The softer-than-expected inflation print has revived market expectations of potential rate cuts by the Reserve Bank of India in the coming quarters, providing a boost to bond prices.

In addition, the lack of any fresh escalation in the India-Pakistan conflict helped restore confidence among investors. The brief flare-up in tensions last week had led to cautious positioning across the fixed income market, with traders paring holdings amid heightened uncertainty. However, with a ceasefire in place and no adverse developments since, participants returned to the market with renewed appetite.

The positive undertone was also supported by expectations of the RBI’s open market operations later this week, which is anticipated to include the 6.79% 2034 bond. This has added a further layer of demand for select maturities along the curve.

Tenure	Today	Previous
10-year Gilt	6.24%	6.28%
5-year gilt	5.99%	6.02%
5-year OIS	5.66%	5.65%

The Indian rupee ended slightly higher against the US dollar on Wednesday, supported by easing global crude oil prices and a weaker dollar index. The domestic currency closed at 85.28 per dollar, gaining 5 paise from Tuesday’s close of 85.33.

The rupee had opened 21 paise stronger, tracking favourable global cues, but moved within a narrow range for most of the session amid continued volatility. So far this month, the rupee has declined around 0.80%, reflecting cautious sentiment despite the recent rebound.

The dollar index, which measures the US currency against a basket of major global peers, weakened sharply during the day. After an early rally this week, fuelled by progress in US-China trade talks, the index slipped 0.68% to hover near the 100 mark, offering some support to emerging market currencies, including the rupee.

On the domestic front, investor sentiment was bolstered by soft inflation data. India’s Consumer Price Index inflation eased to 3.16% in April, the lowest since July 2019. The benign inflation reading has strengthened expectations of a dovish policy stance from the Reserve Bank of India, and helped shore up confidence in the rupee.

Unit	Today	Previous
Dollar/Rupee	85.27	85.33
Dollar Index	100.41	100.83
1-year Dollar/rupee premium (%)	2.12%	2.19%

OUTLOOK
Equities are likely to remain resilient, driven by strong momentum in midcaps and sustained buying in defence and capital goods stocks. The broader market is expected to continue outperforming benchmark indices, particularly as investor confidence improves following the India-Pakistan ceasefire and stable domestic macro indicators. While headline indices may face intermittent profit booking, sector rotation could support overall market breadth. Stocks in IT, metals, and realty may see selective interest, while banking could remain under pressure unless fresh triggers emerge.

Government bonds are expected to see further buying interest following softer-than-expected inflation. The 10-year benchmark yield could trend lower, supported by expectations of RBI's accommodative stance and a potential open market bond purchase by the central bank. With inflation falling to a multi-year low of 3.16%, investors may anticipate more policy room to support growth, enhancing demand for gilts.

The Indian rupee is likely to stay range-bound with a slight appreciation bias, aided by falling crude prices and a retreating dollar index. However, volatility may persist given external factors like US economic data and global risk sentiment. 

Key Events & Data Due Wednesday:

Economic Data

• India trade data
• UK Jan-Mar GDP data
• Eurozone Jan-Mar GDP data
• US April Core PPI data
• US April Industrial Production 
• US weekly Initial Jobless Claims data

Corporate Actions

• Jan-Mar earnings:  Arvind, Balmer Lawrie & Company, Balrampur Chini Mills, Bikaji Foods International, BLS International Services, Cantabil Retail India, Caplin Point Laboratories, CESC, Cochin Shipyard, Crompton Greaves Consumer Electricals, Cubex Tubings, Datamatics Global Services, Garware Technical Fibres, Global Health, Godfrey Phillips India, Godrej Industries, Gujarat Mineral Development Corporation, IFCI, INOX India, ITC Hotels, JSW Energy, LIC Housing Finance, LT Foods, Medi Assist Healthcare Services, NCC, NOCIL, Orient Technologies, P N Gadgil Jewellers, Page Industries, Patanjali Foods, PB Fintech, Pricol, SKF India, Steel Strips Wheels, The South Indian Bank, Tijaria Polypipes, Transindia Real Estate, Tube Investments of India, Vinati Organics, Wanbury, Websol Energy System,  and Zee Learn
• Balmer Lawrie & Company to consider bonus share issue 
• Iris Clothings to consider bonus share issue 

Policy Events

• Fed Chair Powell Speak
• ECB's Elderson Speaks
• ECB's De Guindos Speaks