Indian equity benchmarks reversed early losses on Tuesday, with the Nifty 50 gaining 0.18% to settle at 23,425.40 by midday, as a sharp rally in information technology stocks more than offset weakness in oil and banking shares as well as sustained foreign portfolio outflows. The broader market had opened lower amid escalating Middle East tensions and heavy selling by overseas investors, but a strong bounce in tech names helped the index break a four-session losing streak that had erased nearly 3% from both the Nifty and the Sensex earlier in the week.
IT Sector Surge
The Nifty IT index soared 4.18%, driven by heavyweight stocks such as Infosys and Tata Consultancy Services. Infosys climbed over 4% in morning trade, while TCS added approximately 3.5%. Other IT majors like Mphasis and LTIMindtree also rose close to 3% each. The rally in Indian IT firms mirrors a broader global trend, as companies like Anthropic and OpenAI have been securing contracts and partnerships that investors view as promising, according to Gaurav Sharma, head of research at Globe Capital.
Oil Prices and Rupee Pressure
Brent crude oil remained elevated near $94 a barrel, holding most of its more than 5% gain from the previous session, as traders monitored U.S.-Iran talks and shipping traffic through the Strait of Hormuz. For India, a major crude importer, higher oil prices threaten to widen the current account deficit and stoke inflation, especially as the rupee remains under pressure. The Indian rupee slipped 0.2% to 95.15 against the U.S. dollar, with traders noting intervention by state-run banks, likely on behalf of the Reserve Bank of India. Barclays analysts suggested the RBI could raise its inflation forecast, cut its growth projection, and use non-rate measures to support the currency.
RBI Policy Decision in Focus
All eyes are now on the Reserve Bank of India's monetary policy decision scheduled for Friday, June 5. According to a Reuters poll, nearly 80% of economists expect the central bank to hold the repo rate steady at 5.25%. Goldman Sachs analysts are not anticipating a rate hike to defend the rupee but are watching for a hawkish tone and potential measures to attract dollar inflows.
NHPC Share Sale
Shares of NHPC fell after the government launched an offer for sale of up to 6% of the company, with the floor price set at 71 rupees, roughly 8% below the stock's last closing price. The OFS allows large shareholders to sell their stakes on the exchange.
Market Outlook
Despite the IT-driven rebound, market participants remain cautious. Gaurav Garg, research analyst at Lemonn Markets Desk, noted that traders are still wary of a broader Middle East conflict and its implications for oil supply and energy prices. Foreign institutional investors sold shares worth 39.12 billion rupees on Monday, adding to the selling pressure. Analysts caution that if oil prices rise further, the rupee continues to weaken, or foreign selling persists, the recovery may prove short-lived. Ajit Mishra, senior vice-president for research at Religare Broking, highlighted that volatility in global bond yields and commodity prices, along with the ongoing West Asia crisis, has increased concerns over crude oil prices, inflationary pressures, and overall global risk appetite, leading to profit booking across sectors.
