Nifty's July Rally: Can the market repeat its 9-out-of-10 winning streak?

Mint

5 days ago

July has long been a favourable month for Indian equities, and July 2025 appears poised to uphold that tradition. The Nifty index, which has posted positive returns in nine out of the past ten Julys, is entering the month on a strong note backed by supportive macroeconomic cues and resurgent foreign institutional investor (FII) activity. With historical trends pointing to consistent gains and several bullish triggers in play, market participants are optimistic that the index will deliver yet another robust performance this month.
The Nifty's July track record is among the most consistent in recent history. From 2015 to 2024, the index delivered a gain in every July except 2019, when it declined by 5.69 percent. That lone exception aside, the momentum has largely been positive, with particularly strong performances of 8.73 percent in 2022 and 7.49 percent in 2020. Even in relatively muted years like 2021 and 2023, the Nifty still managed to inch higher, posting gains of 0.26 percent and 2.94 percent respectively. In 2024, the index clocked a solid 3.92 percent return, reinforcing July's reputation as a seasonally strong period for Indian equities.
Several tailwinds are converging to make July 2025 another potentially strong month for the market. A key factor is the return of foreign institutional investors as net buyers. FIIs have now turned net positive for the fourth straight month, reflecting growing confidence in the Indian growth story.
Additionally, macroeconomic conditions have turned supportive. Crude oil prices have declined over 11 percent in the past week, providing relief on the inflation front, while the Indian rupee has appreciated 1.3 percent—its best weekly performance since January 2023. The global sentiment is also upbeat, with easing geopolitical tensions in West Asia and expectations of a potential US Federal Reserve rate cut boosting risk appetite globally.
On Wall Street, key indices like the S&P 500 and Nasdaq have reached new all-time closing highs, further enhancing the overall risk-on environment. Domestically, investors are also eyeing the upcoming Q1 earnings season for cues on corporate performance. Early signs of stable or improving earnings could act as a further catalyst for the Nifty.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that global equity markets are reflecting positive sentiment, with the US "mother market" hitting record highs. "West Asian geopolitics is no longer a threat to global economy or markets. Strong macros of the Indian economy can facilitate increasing fund flows into Indian equity," he said. Vijayakumar added that the continued weakness in the US dollar, with the dollar index now at 96.81, reduces the risk of FII outflows and may even support further buying despite rich valuations. However, he cautioned that poor earnings growth remains a concern, and progress on an India-US trade deal will be crucial in determining near-term direction.
With a solid historical foundation, favourable domestic and global macro trends, and renewed foreign investor interest, July 2025 appears well-positioned to continue Nifty's winning streak. While corporate earnings and trade developments will be closely watched, the month has all the ingredients for another leg higher in the ongoing bull market. Investors may find this period opportune, but caution is warranted until earnings visibility improves.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.