By Our Business Correspondent
Indian equity benchmarks ended marginally higher on Thursday after navigating a volatile trading session dominated by weekly Sensex derivatives expiry, persistent foreign institutional investor (FII) selling and heightened geopolitical tensions in West Asia. Despite intraday swings, investor sentiment found support from reports suggesting potential tax relief for foreign portfolio investors (FPIs) in government securities and selective buying in broader market segments.
With investors remaining cautious ahead of the Reserve Bank of India’s monetary policy decision scheduled for 5 June, market participants largely avoided aggressive positioning, awaiting cues on interest rates, inflation management, growth outlook and liquidity conditions.
At the close, the S&P BSE Sensex advanced 13.84 points, or 0.02 per cent, to settle at 74,360.01, while the Nifty 50 gained 10.95 points, or 0.05 per cent, to finish at 23,416.55, holding above the important 23,400 mark.
Consumer-focused and banking stocks lent support to benchmark indices. Titan Company emerged among the top contributors with a gain of 3.48 per cent, followed by Eternal, which climbed 2.98 per cent, while ICICI Bank added 0.78 per cent.
However, the broader market delivered a stronger performance than headline indices, indicating selective accumulation beyond large-cap counters. The BSE 150 MidCap Index rose 0.46 per cent and the BSE 250 SmallCap Index gained 0.60 per cent, reflecting sustained investor appetite for domestic growth themes.
Market breadth remained positive with 2,244 stocks advancing on the BSE against 1,940 declines, while 182 shares remained unchanged.
A notable sign of stabilising sentiment emerged from volatility indicators. The India VIX, widely regarded as the market’s fear gauge, declined 2.41 per cent to 15.89, suggesting that traders expect near term uncertainty to moderate despite external pressures.
Tax Relief Proposal Boosts Debt Market Sentiment
Investor confidence received a lift after reports indicated that the government may eliminate capital gains tax on FPIs investing in government securities.
According to reports, the proposal has reportedly secured Cabinet approval and may be introduced through an ordinance route.
At present, overseas investors pay a 12.5 per cent long term capital gains tax on listed bonds held beyond twelve months and may also face a 20 per cent withholding tax on interest income.
If implemented, the proposed reforms could significantly improve India’s attractiveness as a debt investment destination at a time when foreign investors continue reducing exposure to equities.
Market analysts believe such a measure could attract fresh overseas capital inflows, support the rupee and strengthen India’s positioning in global bond markets amid elevated global uncertainty.
RBI Decision in Focus as Inflation Risks Intensify
The market’s cautious undertone also reflected anticipation surrounding the RBI’s policy announcement.
Investors are expected to closely monitor the central bank’s assessment of inflationary pressures, particularly those linked to energy prices and weather related supply disruptions.
The policy commentary will also be watched for indications on liquidity management and economic growth projections in an increasingly uncertain global environment.
Monsoon Arrives, But Weather Risks Persist
Adding another layer to economic calculations, the southwest monsoon reached Kerala on Thursday, arriving three days later than its normal onset date.
The June–September monsoon remains a critical driver of India’s nearly $4 trillion economy, contributing roughly 70 per cent of annual rainfall and directly influencing agricultural output, rural consumption and reservoir levels.
The rains support sowing activities for major crops including rice, corn, cotton, soybean and sugarcane.
However, concerns remain elevated after forecasts indicated that an El Niño affected weather cycle in 2026 may produce the weakest monsoon in more than a decade, raising the risk of lower crop production, food inflation and slower economic expansion.
Government Moves to Shield Aviation Sector from Fuel Shock
In a major economic intervention, the Union Cabinet approved one-time budgetary support of up to Rs 10,000 crore for oil marketing companies to stabilise Aviation Turbine Fuel (ATF) prices for Indian airlines.
The support mechanism will operate through interest-free advances routed via the Ministry of Petroleum and Natural Gas and is intended to protect both domestic and international air operations.
The decision follows a sharp escalation in ATF prices during the West Asia crisis, with fuel costs reportedly surging from Rs 60.5 per litre in March to Rs 142 per litre in May.
Under the revised framework, domestic ATF prices will be capped at Rs 75.6 per litre through a revolving support structure for a period of 36 months.
Officials believe the measure could reduce cost volatility for airlines and prevent broader inflationary spillovers.
Trade Uncertainty Returns as U.S. Proposes Additional Tariffs
External trade developments also remained on investors’ radar after the United States proposed additional tariffs under Section 301 investigations involving imports from 60 economies, including India.
India may face an additional tariff of 12.5 per cent if the proposal advances.
The U.S. has cited concerns over supply chains allegedly linked to forced labour across sectors including aluminium, cotton, rice, coffee and other commodities.
India has rejected the allegations and is pursuing bilateral engagement while the proposal remains under public consultation ahead of hearings scheduled for July.
Numbers to Track
Bond markets remained relatively stable with the yield on India’s benchmark 10 year government security easing to 7.005 per cent from the previous close of 7.026 per cent.
In currency markets, the rupee weakened slightly to 95.8350 per U.S. dollar.
Precious metals remained firm, with MCX Gold futures rising 0.47 per cent to Rs 159,270.
The U.S. Dollar Index slipped 0.21 per cent to 99.29, while the U.S. 10 year Treasury yield declined to 4.477 per cent.
Meanwhile, Brent crude retreated 1.13 per cent to $96.70 per barrel, easing some immediate concerns around imported inflation.
Global Markets and Corporate Movers
Global sentiment remained mixed.
European markets traded higher after reports of a ceasefire agreement between Israel and Lebanon reduced immediate concerns around regional escalation.
Asian equities closed lower amid elevated oil prices and geopolitical uncertainty.
Wall Street also ended sharply lower overnight as rising energy prices and bond yields revived concerns that the U.S.–Iran confrontation could reignite inflation.
Among individual stocks, Rajesh Exports hit the lower circuit after regulatory action linked to allegations of financial irregularities.
Hero MotoCorp gained after launching its first flex fuel motorcycles and signalling expansion into cleaner mobility technologies.
Drone maker ideaForge Technology surged after announcing plans to raise up to Rs 500 crore.
PhysicsWallah rallied sharply after restructuring its student financing strategy through regulated NBFC partnerships.
Jain Irrigation Systems advanced following commissioning of a large scale biochar facility in Maharashtra, while Agarwal Industrial Corporation soared after securing a major supply order from HPCL.
Thursday’s market action reflected a classic wait and watch environment: resilient domestic participation offset external risks, but investors are likely to seek stronger policy and macroeconomic signals before committing to the next directional move.