Indian equity benchmarks recorded another lacklustre session on Thursday as bears maintained a tight grip on overall market performance. Trading remained subdued from the opening bell downward amid broad-based selling across sectors.

• Sensex ended in deep red amid broad-based selling.
• Nifty indices finished lower as mid and small-cap stocks came under pressure.
• Foreign Institutional Investors extended their sustained selling momentum by offloading equities worth Rs 6,121.37 crore on Wednesday.

Sentiment remained under heavy pressure following the Reserve Bank of India shifting its policy stance toward a calibrated tightening framework. Traders remained cautious during the session as foreign institutional investors continued their selling spree.

Money Markets and Banking Liquidity

In the short-term money markets, overnight call rates edged lower during the penultimate session of the reporting cycle. Rates fluctuated between a high of 5.50% and a low of 4.75%.

• Overnight Call Rates fluctuated between a high of 5.50% and a low of 4.75%.
• Policy Repo Rate hike of 25 basis points was enacted by the Reserve Bank of India.
• Banking System Liquidity is projected by RBI Governor Sanjay Malhotra to be absorbed within FY27 itself.

RBI Governor Sanjay Malhotra stated that the massive surplus liquidity currently present in India’s banking system will be absorbed within the current financial year itself through currency leakage, central bank operations, and reserve requirements.

Global Headwinds and Sector Impacts

Weak international cues and elevated commodity prices compounded the domestic downward trend. European markets traded lower while Asian markets ended lower amid rising bond yields and elevated oil prices linked to the Iran conflict and regional shipping attacks.

• Export Sector Concerns rose as the Federation of Indian Export Organisations warned that recent repo rate hikes heighten borrowing costs for MSMEs.
• Services Sector Outlook strengthened during Q2:2026-27 according to RBI surveys reporting improved turnover and full-time employment.
• Bilateral Ties were reaffirmed by India and the United Kingdom regarding the Financial Markets Dialogue in supporting sustainable growth and deeper trade.

India and the United Kingdom reaffirmed the significance of the Financial Markets Dialogue in sustaining bilateral trade and resilient financial structures. Markets face continued friction as domestic monetary tightening aligns with ongoing global bond yield pressures.