Overview of Market
Overview
Indian equities have turned incrementally constructive, supported by easing volatility and moderation in FII selling. Indian large cap indices (Sensex and Nifty 50) closed July 2026 with modest gains, advancing 2% despite a volatile global backdrop characterized by sharp movements in crude oil prices, fluctuating US-Iran geopolitical situation, and a strong Q1 FY27 earnings season. Broader markets also participated in the rally, with the Mid-Cap Index gaining 1.8% and the SmallCap Index rising 2.5%. Renewed US-Iran tensions pushed Brent crude oil prices sharply higher to US$ 90 per barrel, compared with US$ 72 per barrel a month earlier. Major central banks (US Fed ECB, BoJ) all kept benchmark policy rates unchanged. On the domestic front, inflation continued its upward trajectory, driven by higher food and fuel prices, elevated precious metal costs, and an unfavourable base effect. The Reserve Bank of India continues to be data-dependent, with future rate decisions dependent on the evolving geopolitical tensions and progress of the monsoon. The strong initial response to the FCNR(B) scheme ($37b) has eased the pressure on the currency and bodes well for banks’ credit growth. During the period, global equities were a mixed bag. Hong Kong (+13%), Indonesia (+11%), and Singapore (+9%) did well but a global semiconductor and AI-related sell-off hurt South Korea (-22%), Japan (-8.0%), Taiwan (-6.5%) and Shanghai (-6.4%).
Fixed-Income, Currency and Commodity Markets
Global bond yields remained range-bound during the month as investors balanced evolving market sentiment against incoming economic data. India government bond yields also traded within a narrow range, supported by steady capital flows, range-bound crude oil movement ($70-$90 / bbl) and hopes of inclusion of Indian government securities in Bloomberg bond indices (which didn’t fructify eventually). The U.S. Dollar Index (DXY) declined by ~1.6% in July, weighed down by softer U.S. economic data and strong yen appreciation that triggered broad USD selling. However, expectations of a potential Fed rate hike later this year keep the dollar relatively well-supported. Despite the weaker DXY, the INR depreciated against the USD due to elevated crude oil prices and associated import-related dollar demand, notwithstanding RBI’s intervention in the FX market. The rupee closed July at 95.39/USD and has depreciated by approximately 6.1% against the U.S. dollar in 2026 YTD. Industrial metals markets are caught between tighter domestic controls on raw materials and weak end-use demand. Precious metals consolidated as central banks continued to diversify reserves away from the U.S. dollar. Silver and platinum are likely to benefit from gold’s strength, although price action in both metals is expected to remain more volatile.
Flows & sectoral performance
DIIs remained net buyers (~₹35,099 Cr), while FIIs continued to be net sellers (~₹5,779 Cr). Sectors outperforming benchmark: IT (+16.8%) and Media (+9.5%) | Sectors underperforming benchmark: Energy (-2.5%) and PSU Banks (-1.5%). - Equity & Growth Funds: Annualized returns of 7–13% - Balanced & Bond Funds: Annualized returns of 6–8% (Refer to annexures for detailed fund-wise performance)
Old Method
New Method