Indian equity markets ended higher for the second straight day. The rally was driven by investor expectations of an interest rate cut in the upcoming RBI policy review, positive global cues, and continued foreign investor participation.
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Sensex closed at 81,442.04, up by 443.8 points or 0.55%
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Nifty 50 ended at 24,750.90, up by 130.70 points or 0.53%
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Midcap and Smallcap indices outperformed with gains of 0.65% and 0.96%, respectively
Major Market Drivers
1. Anticipation of RBI Rate Cut
The Reserve Bank of India is scheduled to announce its monetary policy decision on June 6. Markets widely expect a 25 basis points (bps) repo rate cut, which could lower borrowing costs and boost consumption and investment. Some analysts have speculated about a more aggressive 50 bps cut, but 25 bps remains the consensus.
2. Global Tailwinds
A softer U.S. dollar and falling U.S. bond yields have made emerging markets more attractive. Positive sentiment in global markets, combined with expectations of a dovish Federal Reserve, supported bullish trends in Indian equities.
3. Foreign Inflows
India remains among the top Asian destinations for foreign institutional investments in 2025. Continuous FII inflows into large caps and banks are helping sustain the rally.
4. Sectoral Momentum
Sectors leading the rally:
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Pharmaceuticals: Companies like Dr. Reddy’s, Zydus, and Glenmark rose 2–4% on strong pipeline updates and biosimilar news.
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Defence: Stocks such as BEL, Cochin Shipyard, and GRSE gained on fresh defence orders and strong quarterly guidance.
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Rate-Sensitive Sectors: Banks, NBFCs, and realty companies rallied in anticipation of lower interest rates.
Technical Outlook
Nifty 50 Key Levels:
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Support: 24,631 / 24,515
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Resistance: 24,835 / 24,929
Bank Nifty Key Levels:
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Support: 55,719 / 55,604
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Resistance: 56,201 / 56,355
Nifty has been consolidating in a 1,000-point range for nearly 20 sessions. A breakout above 24,929 could trigger fresh upside, while a breach below 24,515 may lead to short-term corrections.
Sector Highlights
Pharma
Dr. Reddy’s gained over 4% on a global licensing deal. Zydus and Glenmark followed suit on new approvals and product developments.
Defence
BEL received orders worth over ₹2,300 crore. Cochin Shipyard and GRSE surged on high-volume buying.
Real Estate and Infra
Nifty Realty rose by 1.75%. Investors are positioning ahead of potential rate cuts which could revive housing demand and infra spending.
Financials
Private banks such as ICICI Bank and Axis Bank posted gains between 1% to 1.5%. NBFCs saw mild upswings on lower cost-of-funding hopes.
Market Breadth and Other Indicators
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India VIX dropped nearly 3%, indicating reduced volatility.
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Bond Yields: 10-year government bond yield softened to 6.20%.
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Currency: The Indian Rupee appreciated to 85.80 per USD, driven by strong equity inflows and softening crude prices.
Notable Stock Movements
| Stock | Movement | Catalyst |
|---|---|---|
| Dr. Reddy’s | +4.0% | Biosimilar partnership deal |
| Zydus Lifesciences | +2.7% | Drug pipeline updates |
| BEL | +6.5% | Major defence order |
| Cochin Shipyard | +13% | High volume and order book visibility |
| GRSE | +10% | Momentum on defence spending optimism |
| ICICI Bank | +1.65% | Buy-side accumulation ahead of RBI policy |
| Power Grid | +2.0% | Acquisition in transmission infrastructure |
Broader Economic and Policy Context
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Inflation in April moderated to 3.2%, giving the RBI room to lower rates.
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Government spending is expected to remain strong in capital expenditure as per ICRA’s latest report.
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Palm oil imports surged 87% in May, which may influence FMCG and edible oil-related stocks in the short term.
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RBI’s June policy will be closely watched not only for the rate decision but for the central bank’s tone regarding future rate actions.
Market Outlook
Near-Term Strategy:
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Investors are advised to adopt a cautious approach ahead of the RBI announcement.
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Defensive sectors like pharma and public sector defence stocks appear strong.
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Banks and NBFCs may gain further if RBI guidance leans dovish.
Medium-Term View:
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FII flows, corporate earnings, and central bank policies (domestic and global) will guide the markets.
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High valuations in certain sectors mean selective buying is recommended.
Conclusion
The Indian equity market continues to ride on positive sentiment stemming from expectations of monetary easing, robust foreign inflows, and stable global conditions. With critical RBI policy cues expected tomorrow, investors should remain vigilant. The next leg of the rally may depend on how dovish the RBI sounds and how quickly rate cuts translate into economic activity.
