Markets extend gains for fourth straight day

Indian equity benchmarks ended higher for the fourth day in a row on Monday following a rally in global markets and upbeat investors' sentiment after the RBI's jumbo 50 basis points rate cut. Optimism over a new round of trade talks between the US and China also drove the markets higher. 

Some of the important factors in today’s trade:

Foreign capital inflows: Foreign institutional investors (FIIs) purchased equities worth Rs 1,009.71 crore on a net basis on Friday, according to exchange data. 

India’s FDI success is reflection of reforms, trust, investor-friendly policies: Terming India’s foreign direct investment (FDI) journey as truly transformational, Union Minister of Commerce and Industry, Piyush Goyal has said that India’s FDI success story is not only about impressive numbers but also a reflection of visionary reforms, policy clarity, and the global community’s trust in India’s economic future.

India’s agricultural sector transformed by five-fold budget surge over 11 years: The government has said that India's agricultural sector has undergone a profound transformation over the past 11 years through various government schemes and increased budgetary allocations, empowering farmers to lead the nation from food security to global food leadership. 

India's forex reserves drop $1.24 billion to $691.49 billion: RBI said that India's forex reserves dropped by $1.24 billion to $691.49 billion for the week ended May 30, the on Friday. The overall reserves had jumped by $6.99 billion to $692.72 billion in the previous reporting week. The forex reserves had touched an all-time high of $704.88 billion in end-September 2024.

Global front: European markets were trading lower with investors mostly making cautious moves amid a lack of triggers. The focus is on trade talks between the U.S. and Chinese officials in London. Asian markets settled higher on Monday amid hopes that another round of U.S.-China trade talks that will take place in London later today could help ease trade tensions between the two superpowers. 

Finally, the BSE Sensex rose 256.22 points or 0.31% to 82,445.21 and the CNX Nifty was up by 100.15 points or 0.40% to 25,103.20.  

The BSE Sensex touched high and low of 82,669.00 and 82,369.24 respectively. There were 21 stocks advancing against 9 stocks declining on the index. 

The broader indices ended in green; the BSE Mid cap index rose 1.03%, while Small cap index was up by 1.19%.

The top gaining sectoral indices on the BSE were Utilities up by 1.65%, Power up by 1.43%, Oil & Gas up by 1.12%, PSU up by 1.07% and IT up by 1.02%, while Realty down by 0.11% was the lone losing index on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 3.19%, Bajaj Finance up by 2.51%, Trent up by 2.33%, Axis Bank up by 2.06% and Power Grid Corporation up by 1.61%. On the flip side, Eternal down by 1.95%, ICICI Bank down by 1.68%, Titan Company down by 0.74%, Mahindra & Mahindra down by 0.52% and Adani Ports &SEZ down by 0.30% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Sanjay Malhotra has said the future monetary policy actions will be decided by the trajectory of growth and inflation. He noted that if the RBI's expectation of 6.5 per cent real Gross Domestic Product (GDP) growth and inflation cooling to 3.7 per cent in FY26 plays out, there is ‘little space’ for interest rate cut. He also spelled out that the aspirational growth rate for India is 7-8 per cent per annum. He said the monetary policy will surely help accelerate the credit growth and help in the broader economic growth.

Malhotra said there is a need for the transmission to get faster in the economy, underlining that the process has been better this time than in the past instances. He said as against two rate cuts of 0.25 per cent each, the bank deposit rates have come down by 0.27 per cent, outstanding credit by 0.17 per cent. He however conceded that the growth rate of fresh loans is a little slow at 0.06 per cent. He said one of the motives of frontloading the rate cuts and coupling it with a CRR reduction is to hasten the transmission.

He said there was no voting on the stance, but the matter was discussed over the three days of deliberations and all the six members of the rate setting panel were for it. He said the reason for changing the stance to 'neutral' now is because it was felt that there is no further room to cut rates, and the same had to be conveyed to all stakeholders and provide a certainty. He added ‘Certainty will strengthen the economy’.

On the CRR cut, he said past experience suggests that ‘we do not need the liquidity buffer at 4 per cent and 3 per cent in the current circumstances is comfortable’. He said the call rate is going to stay at 5.25 per cent and will go down if the RBI undertakes Variable Rate Reverse Repo rate (VRRR) auctions. Meanwhile, the six-member monetary policy committee voted 5:1 in favour of a surprising 50 basis points cut in repo rate. It also announced a 1 percentage point decrease in cash reserve ratio. He also announced a shift in the stance of the monetary policy from 'accommodative' to 'neutral'.

The CNX Nifty traded in a range of 25,160.10 and 25,077.15. There were 39 stocks advancing against 11 stocks declining on the index.   

The top gainers on Nifty were JIO Financial Services up by 3.89%, Kotak Mahindra Bank up by 3.25%, Bajaj Finance up by 2.69%, Trent up by 2.51% and Axis Bank up by 2.17%. On the flip side, Eternal down by 1.86%, ICICI Bank down by 1.73%, Titan Company down by 0.73%, Mahindra & Mahindra down by 0.69% and Adani Ports &SEZ down by 0.32% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 12.72 points or 0.14% to 8,825.19, France’s CAC fell 15.11 points or 0.19% to 7,789.76 and Germany’s DAX lost 125.78 points or 0.52% to 24,178.68.

Asian markets settled higher on Monday amid hopes that another round of US-China trade talks that will take place in London later in the day could help ease trade tensions between the world’s two largest economies. Chinese and Hong Kong shares gained after investors digested key inflation and trade data from China. Consumer price inflation in China eased in May but declined less than forecast, and the producer price index fell more sharply than expected. While China's exports growth missed expectations in May, dragged down by a sharp decline in shipments to the US. Japanese shares rose after the country reported progress in its fifth round of trade talks with the United States and revised data showed the economy contracted slightly less than initially estimated in the first quarter.