IP Beats as RBI Backs Rupee

Market Snapshot

Asset	Level	Change
Nifty 50	23,985.35	-0.04%
Sensex	76,765.92	-0.09%
USD/INR	95.60	-0.18%
EUR/INR	109.05	+0.08%
Reliance	1,275.90	+0.65%
HDFC Bank	748.20	+1.74%
Brent Crude	89.39	+6.30%
Gold	4,133.40	+2.41%
Bitcoin	63,890.59	+0.03%
India Short-term Rate	5.50%	+0.00%
India Long-term Rate	-	-

Prior Economic Events

Data	Prior	Cons	Actual
Industrial Production Year-over-Year	5	5.70	7.30
Manufacturing Production Year-over-Year	5.20	-	7.80

Today's Economic Events

Data	Prior	Cons	Time
No events available

Industrial production jumped to 7.3% YoY, beating consensus by 1.6pp and signaling manufacturing strength.
Rupee strengthened to 95.60 versus USD amid RBI intervention and softer Brent pressure.
Services PMI hit four-year low while equities closed marginally lower on thin volumes.

Yesterday's Recap

Industrial production rose 7.3% YoY in June, well above the 5.7% consensus and prior 5.0% print, while manufacturing output accelerated to 7.8% from 5.2%. Equity benchmarks finished slightly softer, with Nifty 50 at 23,985.35 (-0.04%) and Sensex at 76,765.92 (-0.09%). The rupee advanced for a fourth session to 95.60 against the dollar (-0.18%), supported by RBI measures and Brent crude’s 6.3% spike to 89.39.

Gold climbed 2.41% to 4,133.40 as investors sought safety. Services PMI data released alongside the output figures pointed to a four-year low, raising questions about consumption patterns despite resilient formal-sector activity. No MPC members spoke publicly, leaving markets focused on the governor’s recent remarks that the rupee is now undervalued.

June FDI inflows reached solid levels, supporting infrastructure and services sectors, while above-normal monsoon rainfall helped contain food-price pressures.

The Day Ahead

No major data releases are scheduled for 29 July, leaving markets to digest yesterday’s strong industrial production figures and ongoing RBI liquidity operations. Traders will monitor rupee flows after the central bank’s foreign-capital measures and any updates on polymer note trials approved for ₹10 and ₹20 denominations. Brent volatility remains a key watchpoint given its sharp rebound and potential pass-through to CPI.

Equity sentiment may hinge on FII positioning in financials and IT ahead of the weekend. The absence of fresh releases shifts attention to global cues, particularly any Fed signals that could influence USD/INR direction. Broader growth momentum appears intact, aided by the monsoon and resilient formal activity even as services PMI cools.

Other Economic Notes

India’s economy continues to show resilience even as services activity cools, with SBI Capital Markets highlighting that the Iran-US ceasefire has reduced external risks. The rupee’s shift from overvalued to undervalued territory, per the RBI governor, improves export competitiveness and reduces the need for aggressive intervention. Plastic currency trials signal the RBI’s push for durability and cost efficiency in note circulation.

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Other Economic Notes (continued)

June FDI inflows reached solid levels, supporting infrastructure and services sectors. Above-normal monsoon rainfall should help contain food-price pressures, reinforcing the base-case of stable inflation around the 4.38% June CPI print.

Global Macro News

Brent crude’s 6.3% surge to 89.39 introduces fresh imported-inflation risks for India despite the recent ceasefire cooling some geopolitical tensions. Asian coal imports rebounded broadly except in India, underscoring divergent energy-demand patterns across the region. US policy uncertainty and potential Fed moves continue to weigh on emerging-market currencies, limiting the rupee’s appreciation even with RBI support.

Gold’s 2.41% gain reflects persistent safe-haven demand that could persist if global risk sentiment deteriorates. China’s softer demand signals have tempered earlier optimism on commodity prices, indirectly benefiting India’s terms of trade. European and Japanese buyers stepping up thermal-coal purchases highlight uneven post-pandemic recovery paths that may affect India’s export markets.

Overall, external conditions remain supportive for the rupee provided oil does not reaccelerate sharply.

RBI Watch

The RBI governor stated that the rupee is undervalued, marking a clear shift from earlier assessments and opening room for a more market-driven exchange rate. Recent intervention via a foreign-capital push has helped the currency climb 66 paise in recent sessions, yet the central bank continues to face questions over whether the measures are sufficient. Liquidity management remains focused on absorbing excess volatility without committing to a specific rate path.

Inflation targeting stays anchored around the 4.38% June CPI print, giving the MPC room to maintain its current stance. Forward guidance continues to emphasize data dependence, with markets interpreting the governor’s comments as a signal that further rupee support will be calibrated rather than unlimited. The absence of fresh MPC minutes keeps attention on these public remarks for clues on the timing of any policy adjustment.

India Macro Daily(Beta Mode)