Indian equity benchmarks finished a volatile session with minor cuts on Monday as investors remained cautious ahead of the RBI's policy decision later this week. Indian markets made a gap down opening, as traders were concerned as continuing its heavy selling spree for the eighth consecutive month, foreign investors pulled out nearly Rs 40,000 crore from the Indian equity market in May on fears of an aggressive rate hike by US Federal Reserve that dented investor sentiments. Adding more pessimism, the Union Health Ministry data showed that India logged 4,270 new coronavirus infections taking the tally of COVID-19 cases to 4,31,76,817, while the daily positivity rate was recorded above one per cent after 34 days. However, key gauges trimmed all of their losses to enter into green for a brief period in late afternoon deals, following a positive start in Europe. Traders took some support from RBI data showed that the country's foreign exchange reserves increased by $3.854 billion to $601.363 billion in the week ended May 27. Some support also came with private report stated that hiring activity in India increased by 40 per cent year-on-year in May 2022 led by strong growth in the sectors like travel, hospitality, retail, real estate and banking and financial services. But, markets failed to hold gains and ended marginally lower amid reports that with inflation showing no signs of abatement, the Reserve Bank is likely to increase the benchmark lending rate in quick succession in its forthcoming monetary policy review, a hint for which has already been given by Governor Shaktikanta Das. Traders took note of report that Prime Minister Narendra Modi stressed the need to make India's banks and currency an important part of the international trade and supply chain. He also exhorted financial institutions to continuously encourage good financial and corporate governance practices. Finally, the BSE Sensex fell 93.91 points or 0.17% to 55,675.32 and the CNX Nifty was down by 14.75 points or 0.09% to 16,569.55.

The US markets ended slightly higher on Monday. Investor sentiment got a boost after Beijing rolled back some Covid-related restrictions. A private report stated that Chinese regulators are wrapping up their investigations into ride-hailing giant Didi - potentially signaling that the country's crackdown on its tech sector may be coming to an end. The developments in China could encourage investors about the prospects for the US and European economies as well. However, investors have been grappling with fears that the central bank could raise interest rates too fast and too much, causing a recession. Recent statements from the policy-setting Federal Reserve members indicate that 50 basis point - or a half-percentage-point - rate increases are likely at the June and July meetings. Investors will be focused on the consumer price index reading for May, which is slated for release on Friday. The key inflation gauge is expected to be just slightly cooler than April, which could be interpreted by some as a confirmation that inflation has peaked. Market participants also await a European Central Bank (ECB) policy meeting on Thursday for confirmation whether the central bank will raise rates at the July 21 policy meeting. Meanwhile, the 10-year Treasury yield hit its highest level in nearly a month as investors sold bonds. Though the move appeared to knock stocks off their highs, it did not cause a major decline in equities like similar moves did earlier this year.

Crude oil futures ended marginally lower on Monday after pulling back from early gains that saw prices trade above $120 a barrel after Saudi Arabia raised crude prices. Saudi Arabia raised the official selling price (OSP) of its Arab light crude to northwest Europe, the Mediterranean and Asia. The move comes after a decision last week by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, to boost output by 648,000 barrels a day in July and August failed to put a lid on rising crude prices. The increased target was spread across all OPEC+ members. However, many members have little room to ramp up output, including Russia, which faces Western sanctions. Benchmark crude oil futures for July delivery lower 37 cents or 0.3 percent to settle at $118.50 a barrel on the New York Mercantile Exchange. Brent crude for August delivery declined 21 cents or 0.2 percent to settle at $119.51 a barrel on London's Intercontinental Exchange.

Indian rupee ended unchanged as compared to its previous close as investors remained cautious ahead of the RBI's policy decision later this week. The RBI's rate-setting panel MPC began its three-day deliberation amid expectations of another round of hike in benchmark interest rates to contain inflation that continues to remain above the central bank's upper tolerance level. Some concern also came as the Union Health Ministry data showed that India logged 4,270 new coronavirus infections taking the tally of COVID-19 cases to 4,31,76,817, while the daily positivity rate was recorded above one per cent after 34 days. The weak trade in the local equity market also adversely impacted local forex trade. On the global front, the yen was on the back foot on Monday and the dollar held firm against most peers ahead of a busy policy-focused week in which inflation is in the spotlight with a major European Central Bank meeting and U.S. consumer price data scheduled. Finally, the rupee ended unchanged from its previous close of 77.66 on Friday.

The FIIs as per Monday's data were net sellers in equity segment, while net buyers in debt segment. In equity segment, the gross buying was of Rs 5819.41 crore against gross selling of Rs 9514.28 crore, while in the debt segment, the gross purchase was of Rs 134.11 crore with gross sales of Rs 76.26 crore. Besides, in the hybrid segment, the gross buying was of Rs 6.13 crore against gross selling of Rs 3.16 crore.

The US markets ended higher on Monday at the back of China relaxing some tough Covid-19 measures, even as inflation and interest rate hikes continue to worry investors. Asian markets are trading mostly in red on Tuesday despite the broadly positive cues from Wall Street overnight. Indian markets finished a volatile session in the red on Monday - a second straight day of fall - as losses in IT stocks offset gains in metal stocks and a fag-end rebound in select financial shares. Today, markets are likely to extend their bearish trend with negative start tracking losses in Asian peers. Investors will also await directional cues from central bank meetings and U.S. inflation data due later in the week. There will be some cautiousness with ratings and research firm Acuite Ratings & Research's report that the expectation of the expansion of the current account deficit is not just driven by elevated global commodity prices, but is also linked to the unlocking of the economy reviving pent-up demand and improved vaccination cover aiding an organic recovery in the economy. Besides, Foreign Institutional Investors (FII) continued to be net sellers of domestic stocks on Monday. FIIs pulled out Rs 2,397 crore from domestic stocks. However, some respite may come as Finance Minister Nirmala Sitharaman said the economic growth will continue to be supported by fiscal spending along with an investment push, imparting momentum to the economy based on the idea of growth at macro level complemented by all-inclusive welfare at micro level. There will be some buzz in the auto stocks after dealers' body FADA saw growth in retail sales of passenger vehicles were in May, but a de-growth was witnessed in sales of two-wheelers and commercial vehicles as they remained below pre-Covid levels of May 2019. Besides, the finance ministry has released the third monthly instalment of revenue deficit grant of Rs 7,183 crore to 14 states. Power stocks will be in focus with a private report that power shortages are likely to continue in the short to medium term on rising demand in the peak season and the persisting supply-demand mismatch. There will be some reaction in infrastructure industry stocks as Union Road Transport and Highways Minister Nitin Gadkari said his target is to construct 60 kilometres of highway per day. India's national highway construction slowed to 28.64 km a day in 2021-22 due to COVID-19 pandemic related disruptions and a longer-than-usual monsoon in some parts of the country. Defence stocks are also likely to see action after the Ministry of Defence approved procurement of military equipment from domestic industries.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Coal India has registered a decline in May as compared to the year-ago month in the coal dispatch to captive power plants and sectors like cement. 
• Tata Motors has bagged an order for supply of 10,000 XPRES-T EV units from BluSmart Electric Mobility. 
• Sun Pharmaceutical Industries is planning to increase its field force in the domestic market by 10% in the current fiscal to drive twin objectives of brand focus and geographical expansion.
• ITC has reaffirmed its commitment towards a Greener Earth through its bold Sustainability 2.0 agenda.