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Market Watch

Market Watch

Equity Market Overview June - 2025





Domestic Equity Market Update

  • Indian equities ended the month on a positive note. Large cap-oriented BSE Sensex ended higher by 2.65% (MoM) and Nifty 50 ended higher by 3.10% (MoM). While the BSE Midcap index ended higher by 3.81%(MoM) and BSE Small cap index ended higher by 4.35% (MoM).
  • In terms of BSE sectoral indices, most of the sectors ended on a positive note. Healthcare, Realty and IT were the gainers during the month.
  • During the month, FPIs were net buyers in equities to the tune of Rs 196 bn. (Data as on 27th June).
  • Domestic equity markets ended the month on a positive note after the RBI delivered a larger-than-expected rate cut, easing global trade concerns from the United States (US)-China, steady foreign inflows and easing domestic inflation data. The market sentiment was also boosted by falling oil prices following a ceasefire between Israel and Iran and optimism around US-India trade talks.

    ​​​​​​​ Global Market Updates
  • US equites ended the month on a positive note as durable goods orders for May 2025 surged, jobless claims unexpectedly declined in the week ending Jun 21, 2025, the US President’s announcement of a ceasefire between Israel and Iran, the Federal Reserve decision to keep interest rates unchanged, over potential trade negotiations between the US and China, strong earnings and easing inflation concerns also supported the markets momentum.
  • European equity markets ended on a negative note mainly due to escalating tension in the Middle East and amid rising speculation over potential US involvement in the Israel-Iran conflict. Additionally, investor sentiment was weighed down by ongoing US – China trade uncertainty, prompting increased caution in the markets.
  • Brent oil prices rose from USD 63.90 per barrel to USD 66.74 driven by geopolitical tensions which intensified concerns over supply and hopes over demand, amid growing speculation about potential US involvement in the Israel-Iran conflict and following reports that the US and China agreed to more trade talks. However, Brent oil prices declined following a steep selloff triggered by the Iran–Israel ceasefire.

    ​​​​​​​Most of the Domestic Macro data points showed a strong picture
  • The RBI retained its GDP growth forecast for FY26 at 6.5% YoY, despite mixed signals from the global economy and potential downside risks from geopolitical tensions and trade policy uncertainties. The inflation projection was revised to 3.7% YoY for FY26, down from its earlier forecast of 4% YoY.
  • S&P Global Ratings upgraded its FY26 growth forecast for India by 0.2% to 6.5% YoY, assuming a normal monsoon, lower crude oil prices, income-tax concessions and monetary easing. With inflation not a major risk, more focus on growth risks, and external factors unlikely to significantly constrain monetary policy easing, Asia-Pacific central banks are expected to continue to cut policy rates.
  • Rating agency ICRA retained its India's GDP growth forecast for FY26 at 6.2% YoY, assuming well-distributed monsoons and crude oil prices averaging around USD 70/barrel. However, geopolitical tensions in West Asia, volatility in financial markets, and uncertain trade policies pose downside risks to this growth outlook, which have intensified.
  • According to rating agency ICRA, India's Real Gross Domestic Product (GDP) growth for FY26 will be 6.2% YoY, down from 6.5% YoY in FY25. Real Gross Value Added (GVA) growth is also expected to ease to 6.0% YoY in FY26 from 6.4% YoY in FY25. Inflation is expected to be above 3.5% YoY, the fiscal deficit to be 4.4% of GDP and the current account deficit at 1.2-1.3% of GDP during the same period.
  • In its latest outlook, OECD lowered its FY26 growth forecast for India by 10 bps to 6.3% YoY. OECD expects that the risk of increased trade tensions, including the imposition of higher US tariffs on Indian exports, could dampen external demand and harm export-oriented sectors such as textiles, chemicals, and pharmaceuticals.
  • According to a World Bank report, India’s extreme poverty rate dropped to 5.3% in FY23 from 27.1% in FY12. The decline amounts to 269 mn people moving above the international poverty threshold over an 11-year period.
  • According to data from the Ministry of Commerce and Industry, output growth in India’s eight core infrastructure industries plummeted to a nine-month low of 0.7% YoY in May 2025 from an upwardly revised figure of 1% YoY in April 2025.
  • The Reserve Bank of India (RBI) cut the repo rate by 50 bps on June 6, 2025, a third consecutive reduction. They also changed the monetary policy stance to “neutral” from “accommodative” as muted inflation provided space for policymakers to focus on supporting economic growth.
  • The RBI decided to cut the Cash Reserve Ratio (CRR) by 1%, which will unlock Rs 2.5 trillion liquidity to the banking system. This reduction will be carried out in 4 equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29, 2025, bringing the CRR down to 3%.
  • As per RBI data, credit card spends, supported by a healthy growth in the net card additions, grew by 14.5% YoY to Rs 1.89 trillion in May 2025.
  • According to an RBI study, the Operating Profit Margin (OPM) of Indian private corporations moderated in FY25 amid high input costs. Manufacturing firms’ OPM moderated by 20 bps to 14.2% in FY25 from 14.4% in FY24.
  • As per RBI data, systemic credit growth declined to 8.97% YoY in the fortnight ended May 30, 2025, the lowest in three years, as lenders prioritized asset quality over growth amid stress in the microfinance and unsecured segments. Meanwhile, deposit growth in the system at 9.9% YoY outpaced credit growth by 100 bps. Total deposits stood at Rs 231.7 trillion, while total credit was at Rs 182.8 trillion.
  • As per data from the Finance Ministry, receipts of Goods and Services Tax (GST) after adjusting for refunds grew 20.4% YoY to Rs 1.73 trillion in May 2025.
  • As per data from S&P Global, India’s manufacturing sector experienced a slight slowdown, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) dipping to 57.6 in May 2025 from 58.2 in April 2025.
  • As per data from S&P Global, India's services sector maintained its growth, helped by strong export demand and record hiring. The HSBC India Services Purchasing Managers' Index (PMI) stood at 58.8 in May 2025, marginally up from 58.7 in April 2025.
  • As per data compiled by S&P Global, HSBC’s flash India Composite Purchasing Managers' Index (PMI) rose to 61 in June 2025, up from a downward revised 59.3 in May 2025.
  • Ratings agency ICRA lowered domestic passenger vehicles (PV) wholesale volume growth forecast to 1-4% YoY for FY26, citing concerns over high inventory levels and shortage of critical components such as rare earth magnets. ICRA had earlier pegged the PV wholesale volume growth for FY26 at 4-7% YoY.
  • According to CareEdge Ratings, India's household savings continued to decline for the third straight year, slipping to 18.1% of GDP in FY24. Gross domestic savings declined to 30.7% of GDP in FY24 from 32.2% in FY15.
  • According to Crisil, the cost of both vegetarian and non-vegetarian home-cooked thalis saw a 6% YoY decline in May 2025, primarily due to lower vegetable prices. While vegetarian thali costs remained stable, non-vegetarian thalis became cheaper by 2% MoM.
  • According to ICRA, the government has scope to increase the total Capital Expenditure (Capex) by Rs 800 bn given the buffers and upward revision in FY25 Nominal GDP number, which bodes well for the deficit and Debt-to-GDP targets for FY26. Capex for April 2025 surged 61% YoY to Rs 1.6 trillion, 14.3% of the FY26 Budget Estimates.
  • As per data from the Society of Indian Automobile Manufacturers (SIAM), domestic passenger vehicle sales remained largely unchanged in May 2025, rising just 0.8% YoY to 3,03,099 units from 3,00,795 units in May 2024, as a decline in car sales offset strong growth in the utility vehicle segment. Car sales dropped 12.2% to 93,951 units, while utility vehicles (UVs) rose 7.6% to 1,96,821 units.
  • According to the International Energy Agency (IEA), India is projected to contribute the most to global oil demand growth by 2030, adding 1 mn barrels per day (bpd). Global oil demand is expected to increase by 2.5 mn bpd by 2030, reaching around 105.5 mn bpd.
  • As per ship-tracking data from Kpler, India's imports of Russian crude oil surged to a 10-month high of 1.96 mn barrels per day in May 2025, driven by continued availability at significant discounts compared to global prices. India, the world's third largest oil importer and consumer, imported ~5.1 mn barrels of crude oil in May 2025.
  • According to Crisil, investments in India’s renewable energy, roads, and real estate sectors are estimated to touch Rs 17.5 trillion over FY26 / FY27, up from Rs 13.3 trillion in FY24 and FY25.
  • As per data from Anarock, listed Real Estate Investment Trusts (REITs) in the office space segment have significant scope for consolidation in India, with room for more listed entities. Only 117.2 mn sq. ft. is held by the country’s three listed REITs out of the total 520 mn sq. ft. of office space considered suitable for REITs.
  • According to real estate data analytics firm PropEquity, new housing supply in India’s top 15 tier-2 cities fell by 35% YoY to 30,155 units in Q4 FY25, compared to 45,901 units in Q4 FY24. This drop coincided with a steep 54% decline in affordable housing supply — defined as units priced under Rs 5 mn.
  • According to BCG, the Indian AI market is expected to grow to over USD 17 bn by 2027, more than tripling its current size, driven by increased investments in enterprise technology, a flourishing digital ecosystem, and a strong pool of skilled professionals. India makes up 16% of the world's AI talent, second only to the US.
  • As per data from AMFI, inflow in equity mutual funds slumped to its lowest level in 13 months to Rs 190.13 bn in May 2025, primarily triggered by profit booking by investors. Net inflow in equity funds dropped nearly 22% MoM from Rs 242.69 bn in April 2025. Despite the deceleration, May 2025 marked the 51st consecutive month of positive flows into equity-oriented schemes.

    ​​​​​​​Outlook & Investment Strategy
  • Going forward, the Indian equity market is likely to be driven by movement in the US Dollar index, improvement in consumption demand, developments around middle east tensions, FPI/DII flows, trade negotiation between India and the US, and strong liquidity support by the RBI. Overall, the higher-than-expected pick-up in GDP growth momentum in H2 FY25 bodes well for the outlook for FY26 as well. Growth in the second half was supported by a rise in government capex and construction activity, healthy agriculture performance, and continued momentum in the service sector. Receding tensions in the Middle East and a sharp correction in global crude oil prices have provided respite to the Indian Markets. Focus will now shift to the upcoming earnings season as the week progresses.
    ​​​​​​​
  • The recent challenges and issues with the domestic macro economy and corporate earnings are expected see improvement in the next couple of quarters. With the rate of change in the GDP growth showing signs of improvement, decline in inflation and budgetary support to the middle class is likely to enhance the disposable income in the FY26. Beneficial trade deals, strong monsoons is likely to shore up sentiments going forward. With RBI going all out to support growth through a mix of policy rate cuts and liquidity improvement measures, the wheels of the economy are likely to move faster in the medium term. With the currency volatility also expected to get controlled due to decline in the dollar index, FPIs too could look at Indian markets more favourably. Thus, barring any large external risks, markets are expected to deliver lower volatility in the medium term. High equity valuations continue to remain a challenge for the markets. Any uptick in earnings expectation or faster than anticipated up move in growth indicators could drive the markets higher.

    In terms of deployment strategy, we continue to maintain our investment deployment strategy of 50% Lumpsum and 50% staggered over the next 5-6 months, due to elevated valuations. Fund managers who can pick out companies with superior growth prospects are likely to outperform vs pure value pickers in the medium term. Given the improved earnings performance delivered by the Midcap and few Smallcap sub sectors in Q4FY25, exposure to pure Mid and Small cap funds could be taken through STPs. From asset allocation in Equity Mutual Fund perspective, investors could look at investing across Flexicap, Large and Midcap, Multicap, Hybrid equity, Business cycle funds and using STPs as an instrument to invest in Smallcap/Midcap funds; in line with their risk profile and product suitability from a 2-3 years’ time horizon.




Debt Market Overview June 2025






Domestic banking system liquidity was in surplus throughout the month. Banking system liquidity as measured by the Reserve Bank of India’s (RBI) net Liquidity Adjustment Facility (LAF) stood at a daily average surplus of ~Rs 2.74 trillion in June 2025 as against a daily average surplus of ~Rs 1.71 trillion in the previous month. The call money market traded in the range of ~4.90-5.80% during the month.


Domestic G-sec yields closed higher in June 2025, and the 10-year benchmark, 6.79% G-Sec 2034 bond, ended at 6.39%, compared to the previous month’s close of 6.29%. Indian G-sec yields rose, despite higher quantum of rate easing, as the central bank changed their stance from ‘accommodative’ to ‘neutral’ and their commentary made market participants book profits which capped the gains it made initially. Further, losses were extended due to RBI’s announcement to absorb surplus liquidity from the banking system through a 7-day Variable Rate Reverse Repo (VRRR) auction for a notified amount of Rs. 1 trillion on June 27, 2025.


The US Federal Reserve announced its widely expected decision to leave interest rates unchanged. The Fed maintained the target range for the Federal Funds Rate at 4.25-4.50% in support of its dual goals of maximum employment and inflation at 2% YoY over the long run. As per data from the US Labor Department, the US Consumer Price Index growth accelerated to 2.4% YoY in May 2025 from 2.3% YoY in April 2025. The Core Consumer Price growth was unchanged from the previous month at 2.8% YoY in May 2025. According to Eurostat, the Euro area GDP logged a growth of 0.6% QoQ in Q1 CY25 following a 0.3% QoQ rise in Q4 CY24. The economic growth improved to 1.5% YoY in Q1 CY25 from 1.2% YoY. The European Central Bank (ECB) slashed its interest rates by 25 bps on June 5, 2025, in line with expectations. The Governing Council lowered the deposit facility rate to 2.0%. The refinancing rate was cut to 2.15% and the marginal lending rate to 2.40%. According to Eurostat, Eurozone inflation slowed on falling energy prices. Inflation softened to 1.9% YoY in May 2025 from 2.2% YoY in April 2025. It fell below ECB's 2% YoY target for the first time since September 2024. Core inflation slowed to 2.3% YoY from 2.7% YoY over the same period. The PBOC left its one-year Loan Prime Rate (LPR) at 3%, while the five-year LPR, which is used to set mortgage rates, was kept unchanged at 3.5%, after de-escalation in the US-China tariff exchange lessened the need for more immediate stimulus.

Retail inflation in India eased further as the Consumer Price Inflation (CPI) Index came in at 2.82% YoY in May 2025 from 3.16% YoY in April 2025. The Reserve Bank of India (RBI) cut the repo rate by 50 bps on June 6, 2025, a third consecutive reduction. They also changed the monetary policy stance to “neutral” from “accommodative” as muted inflation provided space for policymakers to focus on supporting economic growth. The RBI decided to cut the Cash Reserve Ratio (CRR) by 1%, which will unlock ~Rs 2.5 trillion liquidity to the banking system. This will be carried out in 4 equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29, 2025, bringing the CRR down to 3%. The RBI retained its GDP growth forecast for FY26 at 6.5% YoY. The inflation projection was revised to 3.7% for FY26, down from its earlier forecast of 4%. As per data from the Commerce Ministry, India’s Wholesale Price Index (WPI)-based inflation dropped to a 14-month low of 0.39% YoY in May 2025, down from 0.85% YoY recorded in April 2025. The decline was driven by easing prices across key categories, including food, fuel, and primary articles. As per provisional data from the Commerce Ministry, India’s merchandise trade deficit narrowed to USD 21.88 bn in May 2025, down from USD 26.42 bn in April 2025 and USD 22.09 bn in May 2024. Merchandise exports stood at USD 38.73 bn in May 2025, while imports contracted to USD 60.61 bn. As per CBDT, net direct tax collections till June 19, 2025 dipped by 1.39% YoY to Rs 4.58 trillion. Non-Corporate tax collection grew by 0.71% YoY to Rs 2.72 trillion. Net corporate tax collections declined by 5.13% YoY to Rs 1.72 trillion. Securities Transactions Tax increased by 12.13% YoY to Rs 130.13 bn. As per RBI data, India’s Current Account Balance posted a surplus of USD 13.5 bn (1.3% of GDP) during Q4 FY25 due to a surge in services exports. There was a Current Account Surplus of USD 4.6 bn (0.5% of GDP) during Q4 FY24 and a Current Account Deficit of USD 11.3 bn (1.1% GDP) during Q3 FY25.

The liquidity condition, as measured by RBI’s net LAF, improved over the previous month. RBI conducted VRRR auction to bring call money rate at or above the Repo rate. Retail inflation in India had eased further as the Consumer Price Index (CPI) fell to 2.82% YoY in May 2025 from 3.16% YoY in April 2025. The RBI decided to front load policy easing to support growth and hence cut policy rates by 50 bps and also reduced the Cash Reserve Ratio by 100 bps in 4 tranches to provide liquidity support for better transmission of policy rates. Alongside this, the central bank revised the inflation guidance downward to 3.7% YoY for FY26 from its earlier projection of 4.0% YoY and retained growth projection at 6.5% YoY for FY26. They also decided to change the stance from ‘accommodative’ to ‘neutral’, citing limited scope for future policy action. Going forward, the growth-inflation dynamics will determine the necessity of further policy actions by the RBI. Progress around trade deals between US and its major trading partners continues to be a key monitorable for capital flows and market sentiments. De-escalation in the Middle East has pushed crude prices down, supporting overall macros in India.

At this juncture, G-sec yields, which seemingly had priced in a total of ~50 bps of policy rate cuts, are left with limited opportunity for incremental gains unless the central bank considers further growth-supportive policy easing in future policy meetings basis their updated outlook on growth-inflation dynamics. The staggered reduction of CRR is expected to keep the system liquidity comfortable. This may result in the steepening of the corporate bond yield curve. Thus, a case continues to exist for investment into corporate bond funds that are at the 1-4-year segment of the curve. Hence, investors can look at Corporate Bond Funds for a horizon of 15 months and above. For a horizon of 24 months and above, investors may consider Income Plus Arbitrage FoF. Given the rise in yields at the longer end tactical opportunities have also emerged in dynamic bond funds. For a horizon of 3 months and above, investors can consider Arbitrage Funds and money market funds. Whereas for a horizon of up to 3 months, investors can consider Overnight Funds and Liquid Funds. Investors can also look at Multi-asset allocation funds for a horizon of 36 months and above. Investors should invest in line with their risk profile and product suitability.

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