Indian Rupee
The Indian rupee opened weak at 87.61 against the U.S. dollar on Friday, compared to its previous close of 87.59 on Thursday. The Indian rupee opened lower on Friday due to worries about significant U.S. tariffs on Indian exports and continued foreign investment outflows. The rupee had already dropped about 2% in July, approaching its all-time low of 87.95, following President Trump's threat of a 25% tariff, which economists predict could cut India's 2025-26 growth by up to 40 basis points. The uncertainty is compounded by the potential targeting of pharmaceutical exports and the withdrawal of over $600 million by foreign investors from Indian equities on Thursday. This decline in the rupee mirrors a broader weakening trend in Asian currencies, while the dollar remained strong around 100, supported by dimming expectations of a September Federal Reserve rate cut.

Indian Equities
The Indian stock market began August on a downbeat note, with the Nifty falling around 80 points below the 24,700 mark and the Sensex down nearly 300 points. This negative start puts the market on track for its fifth consecutive weekly decline, with pharma stocks particularly under pressure, evidenced by the Nifty Pharma index dropping over 2%. Textile stocks like Gokaldas Export and Pearl Global are also trading lower due to Trump's decision to cut tariffs on Bangladesh. Despite a low FII long ratio of 10% (the lowest since April 2023), which historically has preceded market gains, the immediate outlook remains cautious as earnings reactions from companies like Coal India, City Union Bank, and PB Fintech continue, and ITC's major earnings report is also anticipated.

Major gainers on Nifty were Eicher Motors, Hindustan Unilever, Asian Paint, Nestle India, Kotak Bank and losers were Sun Pharma, Mahindra and Mahindra, CIPLA, Tata Steel, JSW Steel.

Indian Government Bonds
Indian government bond yields are anticipated to remain stable today, fluctuating narrowly between 6.36% and 6.38% for the benchmark 10-year bond, as market participants await the results of the 320 billion rupee ($3.65 billion) debt auction. The market will be closely watching the auction's demand and cutoffs, with resistance noted around the 6.38% mark for the benchmark yield. Looking ahead, the Reserve Bank of India's monetary policy decision on August 6 is a key focus, with most economists expecting rates to remain unchanged despite a recent dip in retail inflation. This expectation is reinforced by recent comments from RBI Governor Sanjay Malhotra suggesting a higher bar for further easing, even after the central bank shifted to a neutral stance and cut rates in June.

The 10-year benchmark bond yield was trading at 6.377%.