July Market Wrap: Nifty 50 advances for 2nd straight month, gains 4%; IT stocks outperform

The Indian market concluded July on a robust note, extending their winning streak to a second consecutive month. This positive momentum has been driven by significant sector rotation, which has played a pivotal role in sustaining the indices at elevated levels.

Despite some volatility experienced after the budget—prompted by the government's increase in capital gains tax and the Securities Transaction Tax (STT) on derivatives—investors have remained bullish, driving record-breaking performances in both the Nifty 50 and the S&P BSE Sensex.

Positive global signals have further fueled the rally. Although foreign investors have continued to be net sellers following the budget, strong participation from retail investors through the mutual fund route has helped offset the market's downward pressure.

The strong participation by retail investors has provided a solid foundation for the Indian market, serving as a buffer against the impact of foreign portfolio investor (FPI) selling.

Further, projections from leading agencies indicating a strong outlook for the Indian economy in the current fiscal year have further buoyed investor sentiment. While market valuations have become a growing concern, this has not dampened the enthusiasm of retail investors.

Overall, the Nifty 50 ended July with a 4% gain, reaching 24,951 points, extending its winning steak for the second straight month. On the July 29, the index nearly touched the 25,000 mark, falling just 0.25 points short. In CY24 so far, the Nifty 50 has set record highs on 49 occasions.

Similarly, the S&P BSE Sensex saw a 3.43% increase in July, extending its winning streak for the second consecutive month. On July 30, the cumulative market capitalisation of BSE-listed companies surged to an all-time high of ₹460 lakh crore, or $5.5 trillion.

IT stocks lead the charge

IT stocks continued their winning momentum with the Nifty IT index posting another double-digit gain in July.  This performance was bolstered by tech giants reporting June quarter numbers, meeting the Street expectations, fueling optimism about a sectoral recovery. Additionally, favorable forecasts from brokerage firms have further contributed to the rally.

The rally was further supported by anticipated Federal Reserve rate cut in September and improved demand conditions in the USA, as evidenced by a GDP uptick in the second quarter.

For over two years, inflation has dominated the Federal Reserve’s agenda. However, a shift is imminent, with US central bankers expected to cut interest rates in September due to growing confidence that price stability is nearing.

Federal Reserve Chair Jerome Powell indicated that the lower-than-expected June inflation figures have bolstered confidence in achieving the inflation target. He emphasised that the central bank will not wait for inflation to reach 2% before implementing rate cuts.

Amid these positive developments, the Nifty IT index concluded the month with an impressive gain of 13%. The index ended the month at a record high of 40,851 points. Over the last two months, the index has gained 26%.

FMCG stocks saw substantial gains this month, driven primarily by the government’s increased budget allocations for rural schemes to enhance rural consumption. This focus on rural development has also spurred a rally in the auto sector, particularly benefiting two-wheeler manufacturers, as rural markets constitute a significant portion of their sales.

As a result, the Nifty FMCG and Nifty Auto indices recorded impressive gains of 9.38% and 6%, respectively, by the end of July.

Additionally, the Nifty Pharma index closed the month with a notable 10.50% increase, marking its largest monthly gain since November. This rise in the pharma sector was fueled by strong numbers posted by the companies for the June-ending quarter.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.