RBI’s FX Curbs Jolt Indian Bonds, Bank Stocks, Offshore Dollar Market

Good morning...

I’m Savio Shetty in Mumbai, and we have lots to digest as traders return from a holiday to kick off a new month.

The signals from the Middle East and the White House keep whiplashing markets. Asian stocks jumped at the open, tracking a Wall Street rally, and oil steadied after President Donald Trump said he foresaw the US ending the war with Iran within two to three weeks. Also taken positively: Iran’s state news agency reported a phone call between European Union Council President Antonio Costa and President Masoud Pezeskhian, who said the Islamic Republic has “the necessary will to end this war,” but only with guarantees “to prevent the recurrence of aggression.”

Back home, sentiment remains rocky after the RBI’s efforts to steady the rupee fell short — and sparked unintended ramifications. But Indian equities will be looking for a reset after closing out their worst monthly decline since March 2020. While firm cues from global markets could offer some early support, the broader backdrop remains fragile because of soaring crude prices and the pressure on the rupee.