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Informist, Saturday, Jul. 4, 2026

 

By Simran Rede

 

MUMBAI – The benchmark Nifty 50 index is likely to continue moving northwards for the second month in July as favourable macroeconomic conditions pave the way for bulls in the near-to-medium term. The market, which was under intense pressure until a month ago, is now recovering from the heat of the war in West Asia, and with the US equities likely to fly into a headwind after their recent rally, analysts believe India could become a preferred bet among emerging markets. They see the correction in valuations, moderation in crude oil prices, and hope of a slight improvement in corporate earnings going ahead helping the market rise. The only speed breaker may be the performance of the Southwest monsoon.

 

While analysts believe Indian stocks' valuations "seem fine" compared to other emerging markets, the progress in the peace negotiations between the US and Iran, transit of oil tankers through the Strait of Hormuz, and the extent and impact of the El Nino climate phenomenon will be watched keenly, they say. After the war between the US and Iran broke out, foreign institutional investors pulled out more than INR 2.95 trillion from Indian equities, keeping the market under pressure for more than three months. Without the cushion provided by domestic investors, the benchmark index would have fallen much more.

 

The Nifty 50 is expected to face resistance at 24500 points in July, according to the median of estimates from 13 broking firms polled by Informist. This is almost 1% higher than the closing level of 24270.85 points Friday, but still 7% off the record high of 26373.20 points hit in early January. The index is down nearly 4% since the war in West Asia began. If the 50-stock index manages to break through this resistance, analysts expect it to move towards 24700 points.

 

"Nifty 50 continues to maintain a positive technical structure on the daily timeframe, with the index forming a cup and handle pattern, a classic bullish continuation setup," Rishabh Srivastava, technical analyst at Lakshmishree Investment and Securities Ltd., said. "After completing the handle formation, the index is currently witnessing a healthy retest backed by improving trading volumes, indicating strong buying interest near key support levels," he said.

 

Aiding the optimism is the significant fall in crude oil prices from the peak in late April. Analysts expect West Texas Intermediate crude oil may fall below $60 per barrel. At 1955 IST Friday, the most active August WTI crude oil contract on NYMEX was up 0.2% at $68.83 per barrel. At the same time, the Brent Crude September futures contract was up 0.4% at $72.06 per barrel.

 

A fall in crude oil prices has also helped to reduce the intensity of the sell-off by foreign investors in the domestic market, as per market experts. A recovery in Indian corporate earnings will attract more foreign inflows, according to fund managers and heads of research. Foreign portfolio investors sold shares worth INR 1.43 trillion on a net basis in Apr-Jun, while net sales by these investors through the entire financial year ended March was INR 1.81 trillion.

 

While foreign portfolio investors kept offloading their investments in Indian equities, which were mostly concentrated in large-cap companies, retail investors supported the market by pumping over INR 30 billion in May and more than INR 207 billion in April. This takes the cumulative net inflows by retail investors to INR 237 billion in Apr-May.

 

According to some analysts, the market has already discounted possible negative triggers relating to the India-US trade deal talks and the US-Iran peace negotiations. "I think market has already factored that the (US-Iran) deal will happen," George Thomas, fund manager of equity at Quantum Asset Management Co., said. "And that's likely the right possible outcome. But how favourable or unfavourable it would be is difficult to predict." As a result, market participants do not expect any significant correction going ahead and every dip will be seen as a buying opportunity, he said.

 

However, Harshal Dasani, head of business at INVasset PMS, a portfolio manager registered with the Securities and Exchange Board of India, sounded a note of caution. According to Dasani, if there is a re-escalation of the war and a repeat of the closure of the Strait of Hormuz, or if the weakness in information technology stocks spreads to other export-dependent sectors, the Nifty 50 could break its near-term support level of 23700 points.

 

MARKET MOVERS

Investors will now keep an eye on the June quarter earnings season, set to begin next week. Earnings growth for the quarter is likely to remain subdued owing to the impact of high commodity prices following the war. Analysts expect to see a meaningful improvement in financial results only from the second half of the current financial year.

 

Financial services and information technology stocks together account for nearly 50% weightage in the Nifty 50. The banking sector is expected to outperform other sectors during the reporting quarter as analysts believe credit growth for banks is on track. The systemic credit growth rose to 17.7% as of Jun. 15, driven by higher working capital loan demand amid rising input costs and the regulatory shift in focus from credit deposit ratio to liquidity coverage ratio and net stable funding ratio framework, Motilal Oswal Financial Services said in a report. A surge in corporate borrowings following the rise in bond yields during the June quarter is also likely to have aided credit growth, it said.

 

"Financials remain constructive on the rate transmission cycle and credit growth normalisation," Dasani of INVasset PMS said. Banking and financial services are likely to lead in profitability since credit growth has been strong and net interest margins are good, V.K. Vijayakumar, chief investment strategist at Geojit Investments, said. Vijayakumar expects the earnings of banking and financial companies to continue performing well in the June quarter. Analysts also expect banks' deposit base to improve significantly in FY27 on the back of inflows into foreign currency non-resident dollar-denominated bank deposits under the Reserve Bank of India's foreign exchange swap facility for such deposits.

 

Earnings growth of IT companies is expected to be weighed down by macroeconomic challenges and risks posed by the advances in artificial intelligence. Analysts expect the management commentary of IT companies to remain "soft". They struck a note of caution for the sector due to near-term headwinds from artificial intelligence, including weak discretionary spending and worries about demand. Indian IT companies earn more than half of their revenue from the US and the risk to US economic growth and inflation from tariffs has been weighing on the sector. Recently, analysts said the capability of AI models has improved drastically, and they have become better at software development. This has increased the risk to Indian IT services jobs. AI will impact application development and maintenance, which will be done by fewer human beings or engineers in the future, disrupting the existing models of Indian IT services companies, they said.

 

Market experts project India Inc. earnings to have a meaningful recovery from the second half of the current financial year. "Market knows that there will be some bit of earnings pressure in this quarter (Apr-Jun) because last quarter, when the results came, a lot of the companies managed with their existing inventory and they would have refreshed that with higher cost inventory this quarter. So, that is a known thing for the market and it may not react negatively to any earnings downgrade," Thomas of Quantum Asset said. "We are optimistic on the markets but near-term volatility and the duration of war, which is beyond anyone's capacity (to predict, will also direct the market outlook)," he said.

 

Analysts are of the view that the valuations of large-cap stocks seem "quite comfortable" and "fairly reasonable", negating the chance of a sharp downside. "Even relative to global markets, our valuations seem okay," Thomas said. "So, valuations are not a challenge. Even flows are reasonable in the domestic market." The Nifty 50 is currently valued at a price-earnings ratio of 16.8 times for the financial year 2026-27 (Apr-Mar), Kotak Securities said in a report.

 

Another major factor deciding the market outlook currently is the situation of the monsoon. While the below-average monsoon is a concern, some analysts believe it is too early to assess whether the monsoon is deficient or not. They also want to believe that the impact of El Nino will not be as bad as it was expected earlier. "While monsoons are a concern...we have to understand that there is a slight shift in the monsoon patterns in the country...if you see the last 4-5 years, we have seen the onset of delayed monsoons...So right now, it is too early to assess whether the monsoon has failed," Vinit Bolinjkar, head of equity research at Ventura Securities, said. Further, he said, the prediction of Southwest monsoon rainfall at 90% of the long-term average "is not going to be materially that negative". 

 

The India Meteorological Department has projected a below-normal rainfall in July for India due to persisting El Nino conditions. The average rainfall during the month is expected to be around 94% of the long-period average of 280.4 mm, according to the weather forecaster.

 

Following are the support and resistance levels for the Nifty 50 index for June from 13 brokerages:

 

BROKERAGE	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	23800	23500	24300	24600
Angel One	24000	23800-23600	24565	24750-25000
Axis Securities	23700	--	24500	--
Choice International	23800	23750	24300	24500
Globe Capital Market	23500	22800	24600	25000
HDFC Securities	23400	--	24500	--
Lakshmishree Investment and Securities	23800	--	24200	24450
LKP Securities	24000	--	24500	24800
Motilal Oswal Financial Services	23500	--	24500	--
Nirmal Bang Institutional Equities	23500	24000	24700	25000
NVS Brokerage	23800	23650	24480	24600
Ashika Group	23500	23800	24500	24800
Teji Mandi Investment Technologies	23300	--	24700	--
Median	23700		24500	24700

 

US$1 = INR 95.2100

 

With inputs from Team Informist

 

Edited by Deepshikha Bhardwaj

 

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