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Markets on Watch: RBI's Big Payout, Key Economic Data, and Global Cues

Get ready for a busy week in the Indian stock markets. Investors are watching several significant factors, such as new economic data, the RBI's record-setting dividend payout to the government, and shifting trends across global markets . How these pieces come together could determine where the market is headed.

RBI's Historic Dividend Boosts Government's Purse
The Reserve Bank of India just paid the central government a whopping ₹2.7 lakh crore, its highest-ever dividend and 27% more than last year's ₹2.11 lakh crore. What does that mean for the country? The budget has more room, less pressure on the fiscal deficit, and potentially more spending on public programs. Some experts estimate this could lower the fiscal deficit by 0.2% to 0.4% in FY25.
Still, not everyone's cheering. Some investors were expecting even more, closer to ₹3 lakh crore, so the immediate market reaction has been a bit cautious.
What to Watch on the Economic Front
This week also brings some key data drops. First up: GDP numbers. Growth for the January–March quarter is expected to climb to 6.7% year-on-year, up from 6.2% last quarter. A better harvest and stronger rural demand are likely behind the bump.
Another one to look out for is the fiscal deficit report for April; it'll offer a clearer picture of how the government is managing its finances.
Also on deck: the RBI's monetary policy committee is meeting, and many are betting on a 25-basis-point interest rate cut. If that happens, it could boost rate-sensitive sectors and push overall economic activity higher.
Global Factors in the Mix
Events beyond India's borders are also shaping the mood. U.S. President Donald Trump recently suspended steep tariffs (50%) on EU imports, giving global markets some breathing room. However, trade tensions remain in the air, so risks remain.
Meanwhile, foreign investors seem to be warming back up to Indian equities. FIIs pumped in ₹17,000 crore during April and May 2025, turning around earlier outflows. What's driving this? Falling U.S. inflation, hopes of interest rate cuts by the Fed, and a weaker dollar.
Markets Open Strong, Rupee Rallies
Kicking off the week positively, Indian markets opened higher on Monday. The Nifty 50 rose 0.41% to 24,955.2, while the Sensex gained 0.46%, hitting 82,092.44. All 13 major sectors saw gains; metals, auto, real estate, and energy led the charge. Financial stocks also climbed, with HDFC Bank, ICICI Bank, and Reliance Industries rising about 0.8% each.
The rupee also had a standout day, logging its most significant single-day gain in over two years and closing at 85.2125. This was thanks to dollar selling by foreign banks and traders cutting their bearish bets.
Valuation Warnings Flashing
Despite the upbeat vibe, some experts are warning about stretched valuations. The MSCI India Index's price-to-earnings ratio is hovering around 25, compared to 15 for other emerging markets and 21 globally. Smaller stocks, especially in the midcap and smallcap segments, look particularly pricey, well above their long-term averages. That could mean the market's overheated.
Final Take: Stay Sharp, Stay Balanced
A lot is happening: record RBI transfers, key economic updates, global uncertainty, and valuation jitters. So, while there are chances to gain, it's also a time to tread carefully. Smart, well-informed decisions will be key as the market continues to digest all these moving parts.
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5paisa Research Team
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