“Emotions are your worst enemy in the stock market.”
Nifty index continued strength from May and witnessed renewed buying interest towards the end where the index jumped above 25,650 zones in June. It consolidated for most part of the month with shallow dips in between which were quickly absorbed.
All broader indices jumped 3%. Nifty up 3.1%, Sensex 2.65%, Large Cap 3.14, Midcap 3.81% & Small cap 3.97%. On the sectoral front we have witnessed continued buying interest in the Financials, Infra, Auto, Private Bank, Consumption, Metal and IT sector while fresh buying interest is witnessed in sectors like Pharma with some weakness and short build up in FMCG space.
Foreign Institutional Investors (FIIs) purchased shares worth INR 7,448.98 Cr., while Domestic Institutional Investors (DIIs) acquired shares worth INR 72,673.91 Cr. On the domestic front, GST collections for the month of June stood at INR 1.85 Lakh Cr.
The IIP growth rate for May 2025 stood at 1.2%, down from 2.7% in April 2025. The subdued growth was primarily due to sluggish performance in Mining and Electricity sectors, which contracted by 0.1% and 5.8%, respectively. However, the Manufacturing sector grew by 2.6% in May 2025.
Retail inflation eased to 2.82% in May 2025, down from 3.16% in April 2025, as food prices continued to soften. In the latest policy announcement, the Repo rate was cut by 50-basis points to 5.5%, accompanied by a 100-basis point cut in the CRR. Additionally, the policy stance was shifted back to ‘neutral’ from ‘accommodative’ all of which were unexpected moves.
On the international front, global economic data signalled diverging trends across regions. In the U.S., signs of a slowdown emerged as Q1 GDP contracted by 0.5% QoQ and retail sales in May 2025 declined by 0.9% MoM, raising expectations of early rate cuts. All eyes are now on the upcoming tariff decision by Trump, scheduled for July 09, 2025.
Federal Reserve kept interest rates unchanged during its June FOMC meeting. The policy stance was neutral with the dot plot now signalling two rate cuts in 2025. The U.S. benchmark yield eased to 4.35% in June, down 15 bps from previous month as the expectation of rate cut has increased with some Fed Governors rooting for the same. The Fed Chair is still on wait and watch mode as he awaits clarity on the impact of Trump tariffs on inflation.
The markets were buoyed by the RBI decision but corrected sharply due to the Israel Iran war. However, the ceasefire led to bullish sentiment in the market. Although the dampening global economic outlook could impact India’s economic growth through weaker external demand, the domestic growth engines, viz., consumption and investment, are relatively less susceptible to external headwinds.
Market has recovered significantly from recent lows. Many stocks in spaces such are defence and capital market have registered a new all-time high. A Sharp cut in interest rates by RBI has helped as has low crude prices. Strong Q4 results vs expectations improved sentiment. Dollar Index lower than 100, weaker USD, etc are all positive for risk and growth assets.
Key events in July:
- US tariff deadline on 9th of July, since most of the deals not yet done, if extended (+ve for markets) if not (-ve for markets)
- Fed Interest Rate Decision on 30th July. Expect no change. Neutral for markets.
- Quarterly results (Q1) to be declared – (Neutral to +ve for markets)
The CROSSOVER quarter!
As we step into the 1QFY26 earnings season, the first six months of 2025 have proven to be one of the most eventful periods, characterized by heightened geopolitical tensions and international economic hostilities, culminating into both kinetic and non-kinetic wars. This spawned not just heightened market volatility (S&P 500 VIX touching 50%+ and India VIX touching 20%+) but also a high level of economic uncertainty and ambivalent signals for monetary policymakers, adversely affecting corporate earnings visibility.
Despite such an adverse backdrop for equities, the global equity markets, including India, have shown impressive resilience in 2025, with Korea (+25% in 6M), China (+20%), Germany (+19%), and Brazil (+19%) leading the way, while India has also recouped 6% since Jan’25.
Investors have chosen to look beyond the near-term geopolitical haze and focus more on long-term market cycles. While the Indian equity market has underperformed EM in CYTD25, it has still risen by 6% during the year, despite facing its own geopolitical challenges and a full-scale kinetic war. Amidst the pall of geopolitical gloom, the Indian economy is standing out for its relative economic stability, with several macro parameters turning favourable and corporate earnings expected to be on a progressively improving cycle going forward.
Seasonality Chart – Nifty 500
Over the last 10 years, July has consistently delivered the strongest returns for the NSE 500 index, with an average gain of 3.83%, making it the most reliable month for positive market performance. This period coincides with the onset of the monsoon season which is a critical factor for the Indian economy where over 50% of agricultural activity depends on rainfall. A timely and well spread monsoon boosts rural income, leading to higher consumption of goods ranging from FMCG and two-wheelers to fertilizers and tractors.
This surge in rural demand often acts as a tailwind for corporate earnings in several sectors, lifting overall market sentiment. Additionally, the beginning of the monsoon reduces uncertainty related to inflation and food prices, further improving investor confidence. As a result, July typically benefits from a favorable macro backdrop, making it a historically rewarding period for equity investors in India.
Investment Strategy:
- Nifty range 24,800-26,000; downside limited.
- The market remained range-bound last week as investors awaited clarity on the upcoming US-India trade deal and the US tariff deadline on July 9.
- A decisive breakout above the 26,000 level could pave the way for a continued rally toward new all-time highs. Analysts suggest that investors consider using market dips as buying opportunities.
- US-India trade deal stuck due to non-agreement in dairy & agri sector. A mini deal may be announced soon sans dairy & agri.
- Markets in July will be expected to be highly volatile. Q1 results & Tariffs will be the key for further direction for markets. India is still the over-valued markets in the world. Need some strong results to win back FII flows, else markets will remain range bound.
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