Sensex, Nifty sustain successive monthly gains

The Sensex and Nifty indices achieved consecutive monthly gains in July, marking the first time this year that both indices had posted such a feat. The Nifty 50 closed at 24,383, a 0.27 per cent increase or 66 points, while the Sensex settled at 78,094, up 0.21 per cent. These gains followed a third consecutive day of success for the Nifty and a weekly rise of 2.59 per cent for the Sensex.

However, the standout performance came from their monthly gains, with Nifty rising 2.2 per cent and the Sensex 2.1 per cent for the month.

IT stocks led the rally, with the Nifty IT index jumping 16.77 per cent, its strongest monthly performance in six years. HCL Technologies surged 25.6 per cent, while other major IT players such as Infosys, TCS, and Tech Mahindra climbed up by 18 per cent. Broader IT indices, including Nifty small-cap and mid-cap indices, also saw impressive gains of 2.5 per cent and 1.8 per cent, respectively.

Despite a jump in crude oil prices, Indian equities outperformed several global indices due to renewed optimism in traditional IT stocks. Ankur Punj, MD & Business Head at Equirus Wealth, suggested that the strong earnings of tech firms in Q1 and the early success of artificial intelligence (AI) helped restore investor confidence.

Foreign portfolio investors (FPIs), who had previously withdrawn around $30 billion from Indian equities in the first half of the year, turned into buyers in July, purchasing shares worth over $2 billion.

Vinod Nair, Head of Research at Geojit Investments Ltd, noted that the recovery in domestic IT stocks was sustained by improving foreign inflows, healthy domestic macroeconomic conditions, and an active earnings season. However, profit-taking at higher levels was seen, as caution persisted due to elevated yields and potential rate-hike concerns. The recovery's sustainability would largely depend on the ongoing earnings season and a reduction in global risks, according to Nair.

Bajaj Finance, Bajaj Finserv, and Jio Financial Services were the top gainers in the Nifty, while TCS, Infosys, and Eternal were the laggards. Sectoral performance was mixed but tilted green, with media, auto, and financial services leading the gains. The Nifty Auto index emerged as one of the session's best performers, driven by stronger-than-expected Q1 results from Mahindra & Mahindra.

Despite a 1.5 per cent decline in the IT sector due to profit-taking, Nifty IT remained on track for its strongest monthly performance in nearly six years, up over 16 per cent in July. Broader markets closed slightly higher, with both the Nifty Midcap 100 and Smallcap 100 gaining 0.44 per cent each. The BSE advances-declines ratio was at 1.55, indicating renewed buying interest.

India VIX declined over 3 per cent, reflecting easing volatility expectations, and the rupee strengthened by 30 paise to close at 95.38 against the dollar. Foreign capital inflows, lower crude prices, and a softer dollar index contributed to the rupee's gain. The dollar retreated after the Bank of Japan intervened in the currency markets, pushing the dollar index to a six-week low.

Gold eased back below $4,060 after reaching a one-week high of $4,120 on Thursday, when the Federal Reserve held rates for a fifth consecutive meeting but left the door open for future hikes. Silver hovered near $58 and both metals were on track for their first monthly gain in months. Oil prices remained under pressure, with Brent slipping near $88 and WTI near $82, as increased vessel crossings through the Strait of Hormuz brought about by US naval escort boosted supply.

Geopolitical tensions between the US and Iran continued to pose risks, keeping a premium in geopolitical risk.

The week ahead would be event-heavy, with markets closely watching the Reserve Bank of India's monetary policy decision, India's Manufacturing and Services PMI data, and developments related to the Strait of Hormuz. Key earnings, including Divi's Laboratories, Persistent Systems, AU Small Finance Bank, and CDSL, would also be crucial. Nifty's next resistance lay in the 24,500-24,550 zone, and a clean break above this level could open the path toward 24,700 and beyond.