Indian markets, which had rallied on Friday following the monetary policy announcement, opened Monday's trade on an optimistic note with expectations of further gains. The market is closely watching the ongoing US-China and India-US trade talks, which have raised investor hopes. Asian markets too opened higher.
India’s retail inflation data for May will be released on Wednesday. In April, the rate stood at 3.16%, and there are expectations that May’s figure may fall below 3%. The US consumer price index is also scheduled for release on Wednesday.
The US delegation currently in Delhi for trade talks has extended their stay beyond Sunday, continuing discussions into Monday. This extension is being seen as a sign of significant progress in negotiations.
India hopes that a deal can be reached before the new tariff structure is implemented on July 9. India has specifically requested exemptions for labour-intensive products like garments, jewellery, leather goods, and footwear from the flat 10% tariff imposed on all countries.
Following the RBI’s rate cut, several banks have announced reductions in lending rates by up to 0.5%. Deposit rates are also expected to fall soon, which could affect those who rely heavily on interest income from fixed deposits, making them less attractive as an investment option.
In derivatives, Gift Nifty closed at 25,098 on Sunday night and opened higher at 25,175 on Monday morning, indicating a strong start for Indian markets.
European markets largely closed higher on Friday, although Germany’s index saw a marginal dip.
US markets surged on Friday, fuelled by stronger-than-expected jobs data for May. Non-farm payroll additions came in at 139,000 versus the expected 125,000. The April figure was revised down to 147,000. Unemployment held steady at 4.2%. Analysts noted that President Donald Trump’s tariff war hasn’t hurt economic growth as feared. However, some still warn that if new tariffs begin to take a real toll, inflation and slowdown could follow.
Trump has announced that US-China trade talks will resume in London on Monday. Treasury Secretary Scott Besent, Commerce Secretary Howard Ludnick, and Trade Representative Jamieson Greer will represent the US. During talks last week, Trump and Chinese President Xi Jinping reportedly discussed rare earth magnet supplies for three major US car companies. However, no formal agreement has been announced yet.
George Saravelos, an analyst at Deutsche Bank, pointed out that legal immigration into the US has dropped by 90% in recent months. He suggested that this decline could pose a greater threat to US economic growth than tariffs.
On Friday, the Dow Jones Industrial Average rose by 443.13 points (1.05%) to close at 42,762.87. The S&P 100 surged 61.06 points (1.03%) to 6,000.36 — its first time crossing the 6,000 mark. The Nasdaq Composite rallied 231.50 points (1.20%) to end at 19,529.95.
US futures, however, are slightly down. The Dow is down 0.11%, S&P 0.13%, and Nasdaq 0.20%.
Asian markets are also up on Monday. Japan’s Nikkei has gained 1%, South Korea’s index is up 1.75%, and markets in Hong Kong and mainland China opened higher as well.
On Friday, RBI Governor Sanjay Malhotra gave markets a boost by cutting the repo rate by 50 basis points — from 6% to 5.5%. The cash reserve ratio (CRR), or the percentage of funds banks must hold in reserve, was also cut from 4% to 3%. Inflation expectations were revised downward from 4% to 3.7%, while GDP growth projections remain unchanged at 6.5%.
Though banks' net interest income may dip slightly in the short term due to the repo cut, the CRR reduction — to be implemented in four phases starting September — will free up ₹2.5 lakh crore, increasing banks' lending capacity and helping offset any income loss.
The RBI’s policy shift reflects its intent to pivot towards boosting growth now that inflation is largely under control. The move is also expected to improve credit flow and enhance banks’ profitability.
However, Malhotra cautioned against expecting another repo rate cut in the immediate future.
The monetary policy also benefits non-banking financial companies (NBFCs) offering gold loans. The permissible loan-to-value (LTV) ratio for gold loans under ₹2.5 lakh has been raised from 75% to 85%.
These announcements energised the stock markets. Sectors like real estate, auto, and consumer durables surged on expectations of cheaper loans. The Nifty Realty index rose by 4.62%. Muthoot Finance, a major player in gold loans, jumped 7%. Banks and financial companies also saw solid gains.
On Friday, the Nifty closed 252.15 points (1.02%) higher at 25,003.05. The Sensex gained 746.95 points (0.92%) to settle at 82,188.99. The Bank Nifty soared 817.55 points (1.47%) to 56,578.40. The Midcap 100 index rose 707.30 points (1.21%) to 59,010.30, while the Smallcap 100 index gained 149.85 points (0.81%) to close at 18,582.45.
The broader market sentiment was also positive. On the BSE, 2,194 stocks rose while 1,832 declined. On the NSE, 1,673 advanced while 1,229 declined. Ninety-five stocks hit 52-week highs, compared to 18 that hit lows. Ninety-three stocks hit upper circuits while 59 hit lower circuits.
Foreign institutional investors (FIIs) made net purchases worth ₹1,009.71 crore in the cash market on Friday. Domestic funds bought stocks worth ₹9,342.48 crore. So far in June, FIIs have pulled out ₹8,749 crore from Indian equities.
Now that the Nifty has breached the 25,000 mark, it may face stiff resistance. Support levels for Monday are at 24,770 and 24,680, while resistance is expected at 25,040 and 25,120.
Better-than-expected US jobs data weighed on gold, causing prices to drop over 1.5% on Friday. Still, as long as prices stay above $3,310 per ounce, bullish sentiment may continue. If the US-China trade talks produce an agreement today, gold prices may fall further. On Monday morning, gold slipped to $3,298 before rebounding to $3,305.
In Kerala, gold prices dropped ₹1,200 on Saturday, taking the price per sovereign to ₹71,840.
Silver closed at $35.85 per ounce on Friday and rose to $36.02 on Monday morning.
The US jobs data lifted the dollar. The dollar index rose to 99.20 on Friday and opened slightly lower at 99.07 on Monday.
In currency markets, the dollar strengthened. The euro fell to $1.1408, the pound to $1.3546, and the yen weakened to 144.56 per dollar.
Yields on US 10-year bonds rose on Friday to 4.506% but eased slightly to 4.496% by Monday morning.
The rupee appreciated on Friday, with the dollar closing at ₹85.63 — 16 paise lower than the previous day. The Chinese yuan weakened to 7.19 per dollar.
Crude oil prices edged up, supported by the resumption of US-China trade talks and upbeat US employment data. Brent crude rose over 1.25% to $66.62 per barrel on Friday. On Monday morning, Brent was at $66.55, WTI at $64.67, and Murban crude at $66.42.
