Indian Equity Market Outlook – July 2026
Indian Equity Market Outlook
During the month of June, the NIFTY 100 TRI gained nearly 3%, supported by the ceasefire in the Middle East and lower crude oil prices. The Realty and Banking sectors were the top performers, while the IT sector declined. Foreign Institutional Investors (FIIs) continued to remain net sellers of Indian equities.
From a valuation perspective, the overall Indian equity market is currently trading in a neutral zone compared with its historical averages. The table below provides a snapshot of current valuations.
| Category | Current P/E | Historical Average P/E | Valuation View |
|---|---|---|---|
| NIFTY Large Cap | 18.4x | 18.7x | Slightly Undervalued |
| NIFTY Midcap | 27.3x | 23.8x | Slightly Overvalued |
| NIFTY Small Cap | 22.4x | 17.3x | Slightly Overvalued |
Global Market Performance (1-Month, in INR Terms)
| Market | Return |
|---|---|
| Hang Seng (Hong Kong) | -10.25% |
| Kospi (South Korea) | -5.52% |
| Nasdaq (USA) | -3.33% |
| Nikkei (Japan) | +5.29% |
| Jakarta Composite Index (Indonesia) | -6.41% |
Debt Market Outlook
US interest rates moved higher after inflation increased to nearly 4%. As a result, the market no longer expects rate cuts and is now pricing in the possibility of a rate hike.
The Reserve Bank of India (RBI) has introduced measures related to FCNR(B) deposits, while the Government has removed the capital gains tax on debt investments made by FIIs in India. These initiatives are expected to attract foreign capital inflows and support the Indian Rupee.
These measures have also reduced the probability of an RBI rate hike, which was earlier expected to support the Rupee, and have led to a sharp decline in bond yields. The yield on the 10-year Government Security (G-Sec) has fallen from around 7.00% to 6.75%.
We do not expect any significant decline in interest rates from the current levels in the near term. Investors may consider investing in lower-duration debt instruments and corporate bond funds, depending on their risk appetite.
Bullion Market Update
During June, the MCX Gold Index declined by approximately 11.42%, while the MCX Silver Index fell by nearly 15.00%.
Key Monitorables
Markets will closely monitor the progress of the peace talks between the US and Iran, the progress of the monsoon, Q1 corporate earnings, and the listing of several large IPOs. These factors are expected to play an important role in determining market sentiment during the month.
Investment Strategy
We recommend that investors allocate their portfolios based on their individual risk profile, financial goals, and investment horizon.
| Asset Class | Recommended Weight |
|---|---|
| Equity | Neutral Weight |
| Debt | Neutral Weight |
| Gold / Silver | Underweight |
