May was quieter than April on the surface. The Nifty 50 closed down just 2.61%, and midcaps and smallcaps actually edged into positive territory. But beneath the headline numbers, crude oil remained the dominant force, fear gauges stayed elevated, and a US-China trade truce reshuffled global trade expectations just enough to matter.

This month, we cover five stories: what the May market moves actually mean, what Q4 told us about Indian banks and NBFCs, how metals and energy companies navigated elevated commodity prices, the Beijing summit and what it means for India, and the Adani Group’s US legal settlement.

Markets Last Month 📨

1. May in the Markets: Mild Numbers, Uneasy Undercurrent

Indian equities ended May marginally lower, though the headline numbers masked a more unsettled picture. The Nifty 50 closed down 2.61%. The Nifty 500 was down 0.94%. Midcaps and smallcaps fared better, with the Nifty Midcap 150 rising 2.23% and the Nifty Smallcap 250 up 0.25%.

Year-to-date, large caps continued to lag. The Nifty 50 is still down around 8%, and the Sensex down more than 12%. Midcap 100 and Smallcap 100 have moved back into positive territory, up 2.05% and 2.4% respectively. The recovery since April has only partially unwound the sharp correction from March.

Sector performance was highly divergent. Pharmaceuticals led, with the Nifty Pharma index gaining 4.7% and Nifty Healthcare up 3%. Strong Q4 earnings, favourable API pricing, Chinese supply-chain disruptions, and Sun Pharma’s acquisition of Organon all supported sentiment. Metals were another standout: the Nifty Metal index gained 2.5% in May and is now up more than 20% year-to-date, driven by strong earnings from Tata Steel, JSW Steel, Vedanta, and Hindustan Copper.

Consumption-oriented sectors struggled. Rising fuel prices and commodity costs weighed on FMCG margins, pushing the Nifty Consumption index down 7.7% for the month.

The India VIX eased more than 12% during May but remains up more than 75% year-to-date. Fear has moderated, not disappeared.

The turning point for markets came in mid-May, when optimism around US-Iran peace talks triggered a sharp fall in crude prices. That single development was enough to prevent May from being a significantly weaker month for Indian equities. The geopolitical variable remains the dominant driver, and it remains outside India’s control.

2. Good Quarter, Tougher Road Ahead? What Q4 Told Us About Indian Financials

The Q4 scorecard for Indian banks and NBFCs looks reassuring on the surface. PSU loan books grew at double digits. Private banks posted strong profits. Select NBFCs raised capital cheaply. The headline data holds up.

Six PSU banks reported during May: SBI, PNB, Bank of Baroda, Canara Bank, Bank of India, and Indian Bank. Loan books for the March quarter grew 13 to 17% year-on-year. Net Interest Income was broadly positive, but Net Interest Margins came under pressure. SBI’s NIM dropped to 2.91%. The issue is structural: as older, lower-yielding deposits mature and are replaced by higher-cost ones, funding costs are rising. PSU banks, more dependent on sticky low-cost deposits, are feeling this more acutely than their private-sector peers.

NPAs remained rangebound, but SBI’s chairman flagged a clear warning: if inflation exceeds 4% due to geopolitical factors, both consumption and credit demand would moderate. That is not a distant risk.

Private banks had a slightly stronger quarter. Kotak, Federal Bank, Yes Bank, Bandhan, and Axis all reported loan growth in the 16% range and higher NIMs than PSU peers. Profit growth was strong, from Kotak’s 16% to Bandhan’s 68%. Cross-holding activity continued: HDFC Bank received approval to increase its stakes in ICICI Bank and Kotak Mahindra Bank, while Kotak received similar approval for Federal Bank and AU Small Finance Bank.

In NBFCs, gold was the standout. As gold prices surged, collateral values rose, enabling borrowers to take larger loans. Muthoot Finance reported a 135% year-on-year profit jump. Manappuram swung from losses in the same quarter last year to over Rs 400 crore in profit. Shriram Finance received a Moody’s upgrade to investment grade. Aditya Birla Capital posted 30.6% profit growth. High-quality NBFCs continued to access bond markets easily, with Bajaj Finance, M&M Financial Services, Bajaj Housing Finance, and Aavas Financiers all active during the month.

The picture overall: a strong quarter, but with visible pressure points accumulating in margins, deposit costs, and early stress signals that will need watching into the second half of the year.

3. Metals and Energy Shine, but Commodity Prices Remain the Key Variable

Elevated commodity prices and geopolitical tensions helped the metals and energy sector deliver strong March-quarter results, though most of that performance rested on conditions that can reverse quickly.

In steel, Tata Steel and JSW Steel both doubled net profits year-on-year, supported by rising steel prices and strong domestic demand. JSW Steel announced capex plans of Rs 22,000 to 24,000 crore for FY27, alongside a major order with L&T for engineering, procurement, and installation of critical process facilities.

Among non-ferrous players, Hindalco reported a sharp profit decline due to a one-time Rs 4,170 crore charge related to a fire at a Novelis plant. Excluding that, the underlying business remained healthy. The company also announced a Rs 12,000 crore investment to expand domestic copper production and reduce India’s import dependence. Jindal Stainless reported 41% profit growth and announced FY27 capex of Rs 2,600 crore targeting 3.5 MTPA in sales by FY29.

In oil and gas, outcomes varied by position in the value chain. Oil India reported a 62% year-on-year profit increase. ONGC benefited from a government reduction in oil and gas royalties. The government also announced a $20 billion offshore energy mapping initiative and increased focus on deepwater exploration, reflecting growing concern about Hormuz-related supply risk. BPCL hit record refinery utilisation of 117% but continued to face LPG under-recoveries. GAIL’s profit declined due to constrained gas supplies from Middle East disruptions.

Coal India reported Rs 10,800 crore in profit and hit a 52-week high during the month. April coal production fell 9.7% despite record power demand, prompting plans to establish sourcing units in Chile and Singapore. The government announced a 2% stake sale to raise Rs 5,000 crore. Petronet LNG announced a Rs 9,000 crore investment to expand LNG storage capacity by 70%, signalling growing urgency around energy security.

The broader point: profits were strong across the sector, but nearly all of that strength was borrowed from elevated commodity prices and geopolitical tension. The sharp crude price decline that followed US-Iran peace talk optimism was a reminder of how quickly the picture can change.

4. US-China Summit Eases Trade Tensions, but Key Issues Remain Unresolved

The US-China summit held in Beijing on May 14 and 15 was the first state visit by a US president to China in close to a decade. In the days before the summit, both sides announced a temporary trade truce: US tariffs on Chinese goods reduced from 145% to 30%, and Chinese tariffs on US imports reduced from 125% to 10%.

Four issues dominated the discussions: rare earth exports, semiconductor and AI-related technology controls, and broader trade matters including agriculture, aviation, and investment flows.

One of the more concrete outcomes was China’s commitment to purchase at least $17 billion worth of US agricultural products annually through 2028, in addition to earlier soybean agreements. China also restored market access for US beef and committed to purchasing 200 Boeing aircraft. President Trump claimed China had offered to help keep the Strait of Hormuz open, but the Chinese side has not validated this.

On technology, the standoff was largely unresolved. US export controls on advanced chips and chip-making equipment remain in place. Reports emerged separately that the US government had approved NVIDIA H200 AI chip sales to several Chinese tech companies, but these were not part of the summit agreement.

For India, the summit’s relevance is indirect but real. Progress on Hormuz access would reduce crude prices and improve energy security. The evolution of semiconductor and rare earth policies will be worth watching, given their implications for India’s own technology ambitions. In the near term, a less volatile global trade environment is itself a modest positive for Indian markets.

5. Adani Group Clears US Regulatory Overhang, but Governance Questions Persist

In late 2024, the US Department of Justice filed charges against the Adani Group for alleged improper payments to Indian state electricity officials in connection with solar power contracts. The charges significantly impacted investor sentiment, caused international partners to pause commitments, and restricted the group’s access to US capital markets.

During May, the DOJ dropped the criminal charges as part of an $18 million settlement. Related allegations involving the US Treasury Office of Foreign Assets Control and the SEC were also resolved without any admission of wrongdoing. The settlement has reopened access to US debt markets for the group. Adani Group stocks have surged between 9% and 22% over the past month.

The group subsequently announced plans to invest approximately $110 billion over the next five years, including $10 billion in utilities and logistics projects in the US. Adani Airports separately disclosed plans to raise $700 million to $1 billion in equity by 2027 and is likely to pursue an additional IPO. Adani Enterprises sold cement assets to Dalmia Bharat for Rs 2,850 crore. Adani Power acquired thermal power assets from Jaiprakash Associates.

One important distinction: while the legal proceedings are settled, the underlying bribery allegations were never adjudicated in court. The regulatory risk has diminished materially, but the broader governance and reputational questions have not been resolved. Investors will need to assess whether the settlement marks a genuine reset or simply the removal of a specific legal overhang.

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