Indian Stocks Rebound as Banks and Retail Shares Lift Markets Ahead of RBI Decision

Mumbai, Oct 6: Indian equity markets gained ground on Tuesday as banking and retail shares helped the benchmark indices extend their recovery, although investors remained cautious ahead of the Reserve Bank of India’s monetary policy decision.

The Nifty 50 rose 0.35 per cent to 22,635.70, while the BSE Sensex gained 0.34 per cent to 72,630.42. The advance followed a rise of around 0.6 per cent in the previous session and brought some relief after an extended period of weakness in domestic equities.

Market sentiment improved following encouraging quarterly business updates from several large companies. Banks and consumer-facing businesses attracted particular attention as investors assessed earnings prospects and the broader health of domestic demand.

Despite the recovery, concerns remained over elevated US Treasury yields, foreign investor selling and global oil prices. These factors continued to limit the strength of the market’s advance.

Banking shares lead gains

Financial stocks were among the strongest performers during Tuesday’s session.

Axis Bank and Kotak Mahindra Bank gained after reporting strong business growth in their quarterly updates. Their advances and deposits both expanded at double-digit rates, indicating continued demand for credit and financial services.

Axis Bank reported gross advances of Rs 13.85 lakh crore, representing a 22.7 per cent increase from a year earlier. Deposits rose 20.7 per cent to Rs 14.52 lakh crore.

Kotak Mahindra Bank recorded a 24.7 per cent increase in net advances to Rs 5.77 lakh crore, while deposits climbed 23.2 per cent to Rs 6.51 lakh crore.

The figures helped strengthen market confidence in the banking sector at a time when investors are closely examining the ability of lenders to maintain credit growth while managing funding costs.

Retail sector attracts attention

Retail company Trent was another major market mover.

The company reported a 23 per cent year on year increase in standalone second-quarter revenue to Rs 5,788 crore. Revenue for the first half of the financial year rose 21 per cent.

Trent also continued expanding its store network, opening 10 new Westside stores and 17 Zudio outlets during the quarter.

The update was positively received by investors, with the stock gaining sharply during Tuesday’s trading session.

The performance highlighted continued expansion in organised retail despite a challenging external environment. Investors are increasingly watching store additions, sales growth and consumer demand as indicators of the strength of India’s domestic economy.

Consumer companies also in focus

Godrej Consumer Products was another company watched by investors after providing an upbeat outlook for its second-quarter performance.

The company expects consolidated revenue growth in the high teens, high single-digit volume expansion and double-digit EBITDA growth. It has, however, acknowledged challenges from uneven monsoon conditions and higher input costs.

The update suggests that consumer businesses are attempting to protect margins while maintaining sales growth in an environment where raw-material prices remain uncertain.

Investors are likely to focus on whether higher input expenses can be offset through pricing, productivity improvements and stronger sales volumes.

RBI decision dominates market outlook

The Reserve Bank of India’s monetary policy announcement is one of the biggest events for financial markets this week.

The central bank’s decision is being closely watched because inflation has increased while economic growth remains firm. Markets are assessing the possibility of a rate increase and its potential impact on borrowing costs, corporate investment and consumer spending.

Banks could experience changes in funding costs and lending rates depending on the policy outcome. Interest-sensitive sectors, including real estate and automobiles, could also react to the central bank’s guidance.

Bond yields and the rupee are likely to respond quickly to any change in expectations regarding future monetary policy.

Global yields remain a concern

The domestic recovery is taking place against a challenging international backdrop.

US Treasury yields have risen sharply, with 10-year and 30-year yields reaching levels not seen in about 24 years, according to Reuters. Higher American yields can reduce the relative attractiveness of emerging-market assets and encourage capital flows towards dollar-denominated investments.

The dollar has also strengthened, increasing pressure on currencies including the Indian rupee.

The rupee was expected to open around 96.32-96.34 against the US dollar on Tuesday, remaining close to its recent record-low levels. The RBI has been intervening in the foreign exchange market to moderate volatility.

Foreign outflows weigh on sentiment

Foreign portfolio investor selling remains another major concern.

Indian equities have experienced significant overseas outflows during 2026 as international investors have redirected money towards other markets and sectors, particularly those linked to artificial intelligence.

Reuters reported that foreign investor outflows had reached $27.8 billion during the year. The persistent selling has contributed to the prolonged weakness in benchmark indices.

Domestic institutional investors have provided some support, but the market remains sensitive to changes in global risk appetite.

A sustained return of foreign capital could improve liquidity and sentiment, while continued withdrawals could limit the durability of any recovery.

Oil prices add uncertainty

Crude oil prices remain another variable for Indian markets.

Brent crude was trading around $101 a barrel on Tuesday. Increased Middle Eastern exports and efforts by the G7 to boost supply have helped ease some pressure on prices, although geopolitical risks remain.

Higher crude prices can affect India through several channels. They increase the country’s import bill, put pressure on the rupee and can contribute to inflation.

Oil-sensitive sectors therefore remain closely linked to developments in international energy markets.

Earnings season gains importance

Corporate earnings will increasingly influence stock-specific movements as companies release quarterly business updates.

Investors are looking beyond headline revenue numbers to assess margins, borrowing costs, capital expenditure and consumer demand.

The strong updates from banks and Trent have provided a positive signal, but market participants remain cautious about whether individual company performances can translate into a broader recovery.

The Indian equity market has recently experienced its longest losing streak in 25 years, making the latest rebound significant from a sentiment perspective.

Outlook remains closely watched

Tuesday’s gains indicate that investors are willing to buy selected shares when corporate performance provides evidence of strong underlying demand. However, the broader market continues to face pressure from global interest rates, currency movements, foreign outflows and energy costs.

The RBI’s policy decision will be the immediate focus. Its assessment of inflation, growth and financial conditions could influence expectations across equities, bonds and currency markets.

For investors, the coming sessions are therefore likely to remain highly sensitive to both domestic policy signals and international developments.

The recent recovery has improved market sentiment, but a sustained change in direction will depend on several factors coming together, including corporate earnings, foreign capital flows, currency stability and the outlook for interest rates.