PMIs Soften, Stocks Rally

Market Snapshot

Asset	Level	Change
Nifty 50	23,306.45	+1.72%
Sensex	75,273.45	+1.63%
USD/INR	94.18	-0.54%
EUR/INR	108.61	+0.11%
Reliance	1,413.10	+0.09%
HDFC Bank	782.30	+2.27%
Brent Crude	100.90	-1.29%
Gold	4,388.90	-3.54%
Bitcoin	68,755.89	-3.58%
India Short-term Rate	5.50%	+0.00%
India Long-term Rate	-	-

Prior Economic Events

Data	Prior	Cons	Actual
HSBC Composite PMI Flash	58.90	58.70	56.50
HSBC Manufacturing PMI Flash	56.90	56.80	53.80
HSBC Services PMI Flash	58.10	58.30	57.20

Today's Economic Events

Data	Prior	Cons	Time
No events available

Flash PMIs disappointed with composite at 56.5 versus 58.7 consensus, signaling slowdown in manufacturing and services amid oil pressures.
Equities rallied as Nifty 50 rose 1.72% to 23,306.45 and Sensex gained 1.63% to 75,273.45, buoyed by easing geopolitical tensions.
Rupee strengthened with USD/INR down 0.54% to 94.18, supported by likely RBI interventions despite record lows.

Yesterday's Recap

India's flash PMI data released weaker than expected, with HSBC Composite PMI at 56.50 against a consensus of 58.7 and previous 58.9, reflecting a broader economic slowdown. Manufacturing PMI dropped sharply to 53.8 from 56.9 prior, missing the 56.8 forecast and indicating contraction risks in the sector. Services PMI eased to 57.2, below the 58.3 consensus and 58.1 previous, highlighting softening demand amid rising input costs.

Despite the soft data, Indian stocks advanced strongly, with Nifty 50 climbing 1.72% to close at 23,306.45 on hopes of Middle East peace reducing oil prices. Sensex followed suit, up 1.63% to 75,273.45, led by banking gains like HDFC Bank's 2.27% rise to 782.30. The rupee appreciated as USD/INR fell 0.54% to 94.18, aided by RBI actions to prevent breaches near 94, while Brent crude declined 1.29% to 100.90 amid de-escalation signals.

Gold and Bitcoin weakened, down 3.54% to 4,388.90 and 3.58% to 68,755.89 respectively, tracking global risk-on moves. Reliance Industries edged up 0.09% to 1,413.10, showing resilience in a volatile session. EUR/INR rose 0.11% to 108.61, reflecting mixed currency flows.

India short-term rate held steady at 5.50%.

The Day Ahead

With no major economic releases scheduled for today, markets will focus on digesting yesterday's PMI misses and monitoring rupee dynamics amid ongoing outflows. Attention turns to global oil price movements, as Brent's recent volatility could influence inflation expectations and RBI liquidity operations. Traders anticipate low volatility in equities and bonds, given the absence of data catalysts.

Broader sentiment may hinge on any updates from RBI on forex interventions or liquidity support. Tomorrow also lacks key events, setting up a quiet end to the week unless external shocks emerge.

Other Economic Notes

India's youth employment challenges persist, with graduate men facing stagnant wages and limited opportunities, while women rely on agriculture amid a fractured job market. Forex reserves are under scrutiny for their adequacy in buffering external shocks, especially with rupee pressures from outflows and oil surges. (cont...)

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Other Economic Notes (continued)

The government plans to support WTO reforms while safeguarding farm interests, aiming to balance global trade with domestic agricultural priorities. The government has retained the headline inflation target at 4%.

Global Macro News

Global oil prices, with Brent at 100.90 after a 1.29% drop, remain a key risk for India due to import dependence, potentially exacerbating inflation and challenging RBI's targets. Easing Middle East tensions have supported Indian stock surges, as seen in Nifty and Sensex gains, by reducing safe-haven flows to gold, which fell 3.54%. Bitcoin's 3.58% decline reflects broader crypto volatility, indirectly affecting investor sentiment in emerging markets like India.

Rising global interest rates could pressure India's capital inflows, with USD strength contributing to rupee weakness despite recent appreciation. Overall, de-escalating geopolitical risks provide tailwinds for India's growth trajectory, though oil price surges pose ongoing inflation threats.

RBI Watch

The government has extended the RBI's 4% retail inflation target framework until March 2031, reinforcing the central bank's mandate amid persistent pressures from oil price surges. Recent RBI communications emphasize vigilance on inflation, with statements highlighting challenges from elevated crude costs testing policy effectiveness. Liquidity management faces strains, as banking system liquidity entered its first major deficit of 2026 due to tax outflows and limited RBI support, potentially keeping call rates and treasury bills below the 5.50% repo rate.

Forward guidance from RBI suggests data-dependent approaches, with interventions stepping in to stabilize the rupee near record lows, preventing breaches past 94 against the dollar. MPC decisions remain focused on balancing growth and inflation, with no shifts indicated in recent minutes despite PMI softness. RBI is working to facilitate rupee expenditure by Russian parties.

These actions imply markets should expect steady rates in the near term, supporting bond stability while monitoring external shocks.

India Macro Daily(Beta Mode)