By Research desk
Market Performance Summery – July 26:
Overview:
- The Nifty 50 climbed to 24,383.60, up around 2% (2.36% from 23,897.65 to 24,383.60), while the BSE Sensex rose to 78,094.64, also up around 2% (2.11%).
- Broader markets also outperformed: the Nifty Smallcap 100 advanced 2.68% and the Nifty Midcap 100 rose 1.94%, while the Nifty 100 gained 2.49%.
What Changed?
- A sharp escalation in the US-Iran conflict drove crude oil roughly 20% higher and kept intraday swings elevated through the month, a reversal from June’s easing tensions.
- Brent crude gained roughly 20% in July, its biggest monthly rise since March, ending near $88 a barrel after topping $94 mid-month — a key inflation and import bill risk going into August.
- Despite the crude spike, the rally was powered by an emphatic comeback in IT stocks, the return of foreign investors after months of selling, and encouraging June-quarter (Q1 FY27) earnings. Indian benchmarks outperformed most Asian peers as well as the S&P 500 and Nasdaq for the month.
- The Nifty IT index surged about 17%, its best monthly performance since July 2020, led by HCL Technologies, the top Nifty gainer, rising about 26% after signing an AI deal valued at $1.14 billion.
Currency & Institutional Flows
- The Indian Rupee stayed under pressure through most of July, weakening to around 95.55–95.61 against the dollar by mid-month, before firming late in the month to close at 95.35 on July 31, up 15 paise on the day, tracking foreign capital inflows and RBI support.
- Foreign Institutional Investors (FIIs) remained net sellers in July 2026, with net outflows of ₹5,778.99 crore, although this was a sharp improvement from ₹49,029 crore of outflows in June, indicating that foreign selling pressure eased considerably during the month.
- Domestic Institutional Investors (DIIs) continued to provide strong support, recording net inflows of ₹35,099.25 crore in July 2026, compared with ₹85,800 crore in June. While the pace of buying moderated, sustained domestic inflows continued to offset foreign selling and helped maintain overall market stability.
Sector Performance:
| Sector | Return | What Drove It? |
| IT | +17.1% | Best sector of the month — a global selloff in AI and chip stocks pushed foreign money toward Indian software services firms, aided by the US Fed holding rates on July 29. HCL Technologies led with a ~26% gain after a $1.14 billion AI deal. |
| Auto | +9.0% | Lowering crude prices improved input-cost expectations and supported demand sentiment. |
| Realty | +9.0% | Benefited from a rotation into real estate, banking, and automobiles as international crude oil prices dropped and India VIX stayed low, signaling a calmer market though this eased later in July as crude spiked back up. |
| Consumer Durables | +10.2% | Broader risk-on rally; specific catalyst not independently confirmed — flagged for further check. |
| Pharma | +5.0% | Defensive rotation amid crude-driven volatility; healthcare-linked sub-index (Nifty Healthcare) rose a similar 4.0%. |
| Metal | +1.8% | Modest gain; no strong directional catalyst confirmed in verified sources. |
| Oil & Gas | +2.0% | Mixed — Brent crude spiked toward $88–94/barrel on the resumed US-Iran conflict, which helped upstream/refining sentiment even as it hurt cost-side sectors elsewhere. |
| FMCG | +0.9% | Muted performance as inflation and input-cost concerns continued to weigh on sentiment. |
| Financial Services | +0.2% | Roughly flat after leading in June; gains capped as investors rotated into IT and cyclicals. |
| PSU Bank | -1.9% | Closed modestly lower after leading June’s rally, with gains across the broader market staying relatively narrow. |
Key Economic Highlights:
| Indicator | Latest Data | The Bottom Line |
| US Fed Meet | 3.50% to 3.75% | Fed stayed on hold, but persistent inflation keeps the policy stance hawkish. |
| Industrial Production (IIP) | 7.3% YoY | Strong manufacturing and infrastructure activity is supporting economic momentum. |
| Manufacturing PMI | 53.5 | Manufacturing growth remains positive, though the pace has moderated. |
| Services PMI | 53.1 | Services sector growth is slowing, pointing to softer demand conditions. |
| Bank Credit Growth | 17.7% YoY | Credit demand remains strong, but slower deposit growth is tightening banking liquidity. |
| Forex Reserves | $682.4 billion | Higher reserves strengthen India’s external position and provide rupee stability support. |
| Fiscal Deficit | Rs 3.1 lakh cr | Healthy tax collections and a primary surplus keep fiscal consolidation broadly on track. |
Fundamental Outlook:
- Earnings remain mixed: Revenue growth is healthy, but margin pressure from higher commodity and energy costs is keeping profit growth subdued, with financials and industrials leading the earnings trend.
- Inflation has moved higher: CPI rose to 4.38% in June, and the RBI has raised its FY27 inflation forecast to 5.1% while keeping GDP growth at 6.6%, signalling a more cautious policy approach.
- RBI is likely to stay on hold: The repo rate remains at 5.25%, and the August MPC is expected to maintain the current stance as inflation is likely to stay above 5% in the near term.
- Crude remains the key macro risk: Brent has eased below US$84/bbl after July’s sharp spike, but oil prices continue to be critical for inflation, the rupee and corporate margins.
- Valuations remain reasonable: Nifty at around 20.5–21x forward earnings is broadly in line with its 5-year average, suggesting the market is not excessively expensive.
- Sector preference stays domestic-focused: BFSI, infrastructure and industrials continue to offer better visibility, while IT and export-oriented sectors remain relatively weaker.
- Key monitorables: RBI commentary, July CPI, Q1 earnings, monsoon progress and Hormuz / US–Iran developments will be the main market drivers this month.
Technical Outlook:
- Trend remains positive: Nifty closed at 24,774, holding above its 50-day (24,162) and 200-day (24,139) averages, keeping the broader uptrend intact.
- Momentum remains strong: RSI at 66.9 shows healthy bullish momentum, though it is approaching the overbought zone.
- Key levels: 24,500 is the immediate support, with 24,000 as the major support, while 25,000 is the key resistance and a breakout could open the way towards 25,250+.
- Volatility remains low: India VIX at 11.9 and PCR at 1.12 indicate a stable to positive derivatives setup, though RBI policy, earnings and crude-oil developments may keep short-term volatility elevated.
US Market Outlook:
- Fed remains hawkish: The Fed kept rates at 3.50%–3.75%, but markets are now pricing two 25 bps hikes in 2026. The latest dot plot moved to a 3.8% median year-end 2026 rate, highlighting persistent inflation concerns.
- Earnings remain the key support: With 61% of the S&P 500 having reported Q2, earnings growth is running at 57% YoY, well above expectations, with AI and technology spending continuing to drive upgrades and positive guidance.
- AI-led rally continues: The S&P 500 closed at 7,489.72, near record highs, with gains still concentrated in AI and technology-related sectors. Consensus expects FY2026 earnings growth of 23%, supporting the broader market trend.
- Valuations leave limited room for disappointment: The market is trading at roughly 21x forward earnings, and consensus year end targets imply only modest upside from current levels, making earnings delivery critical for sustaining the rally.
- Key monitorables: Jackson Hole commentary, upcoming US payrolls and ISM data, the September Fed meeting, and crude-oil developments linked to US–Iran tensions will be the main drivers of market sentiment this month.
Gold Outlook:
- Domestic prices remain firm: 24K gold is trading around ₹1,41,946 per 10g, supported by rupee weakness despite softer global trends.
- Fed remains the key headwind: Expectations of a possible September Fed hike and a higher-for-longer US rate outlook continue to limit upside for gold.
- Safe-haven demand has eased: US–Iran peace talks and lower crude prices have reduced geopolitical support for gold in the near term.
- Rupee provides support: USDINR in the 95–96 range is helping cushion domestic gold prices even if international prices remain under pressure.
- Long-term support stays intact: Central bank buying and upcoming festive-season demand in India should continue to provide a structural floor to prices, although near-term volatility may remain elevated.
Final View:
- Overall outlook remains positive: India’s growth outlook continues to stay healthy, supported by strong domestic demand, government capital expenditure and steady domestic liquidity, while Nifty valuations at around 20.5x forward earnings remain broadly in line with historical averages.
- Earnings and inflation will be the key drivers: The focus this month will be on Q1 FY27 large-cap earnings, the RBI’s August policy commentary and the July CPI data, as these will determine whether the market can sustain the current momentum.
- Crude oil remains the biggest external risk: As India imports a large part of its energy requirement, Brent crude and developments around Hormuz and US–Iran talks will have a direct impact on inflation, the rupee and corporate margins.
- Investment approach: Global and domestic events may keep markets volatile in the short term, but any big correction should be used to increase exposure to quality businesses with strong balance sheets and consistent earnings growth.
Investors are advised to consult their financial advisors before making any investment decisions. This view does not constitute investment advice.
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