Numbers don't lie! July has been Nifty's golden month, delivering positive returns in nine out of the last 10 years with an average gain of 3.6%. With the index breaking out of a five-week consolidation phase amid supportive macros and surging FII flows, investors are betting history will repeat itself once again.
The track record is compelling: only 2019 saw July turn red with a 5.69% loss, while stellar performances like 2022's 8.73% surge and 2020's 7.49% rally have cemented July as a month when bulls traditionally dominate Dalal Street.
The July Effect in Full Display
The historical data paints a picture of remarkable consistency. Over the past decade, July has delivered gains ranging from a modest 0.26% in 2021 to a spectacular 8.73% in 2022. Even in challenging years, the month has largely held its ground. 2024's 3.92% return and 2023's 2.94% gain proving that July's bullish bias remains intact.
"Historically, July has been a bullish month for both the Nifty 50 and Bank Nifty indices. This trend is often attributed to a post-June recovery and as early Q1 earnings optimism tends to fuel investor sentiment," Anand James, Chief Market Strategist at Geojit Financial Services, told ETMarkets.
What makes this July potentially special is the return of foreign institutional investors (FIIs) with renewed conviction. "FIIs have now turned net buyers for the fourth consecutive month, signaling a steady return of confidence in Indian equities," said Sudeep Shah, Head of Technical & Derivatives Research at SBI Securities.
The numbers back up this optimism. FIIs made a spectacular comeback as net buyers Thursday, with equity inflows exceeding ₹12,500 crore, the highest single-day buying in eight months. This surge came as US President Trump hinted at significant progress in US-India trade negotiations.
"Notably, in the derivatives segment, the FII long-short ratio in index futures has climbed to 38.43%, marking one of the highest levels seen in the recent past," Shah added. "A rising long-short ratio indicates that FIIs are increasingly building long positions—a bullish sign that suggests they are anticipating further upside in the near term."
Also Read | Rs 1 lakh crore selloff tsunami threatens Nifty rally as promoters, strategic investors exit
Technical Momentum Building
The technical picture is equally compelling, with market internals suggesting sustained buying interest across the board.
"July continues to look favourable for Nifty, supported by strong internal breadth and leadership from Bank Nifty," noted James. "In terms of trend strength, 100% of Bank Nifty stocks are above the 10-DMA, 83.33% above the 20-DMA, and 91.67% above the 50-DMA—a clear indication of persistent buying."
The Nifty's internals are similarly robust: "82% of its stocks are above the 10-DMA, 86% above the 20-DMA, and 78% above the 50-DMA," James revealed. "Looking at weekly performance, Bank Nifty and Nifty 50 show dominant price action, with 84% of Nifty 50 and 100% of Bank Nifty closing above the previous week's close, confirming solid upward momentum."
The Nifty Bank has already given a preview of what July might hold, hitting a fresh record high of 57,475.40 on Friday. This sectoral leadership often precedes broader market breakouts, with banks historically outperforming during bullish July periods.
"Bank Nifty, known for its higher beta and sensitivity to economic cues, has outperformed Nifty 50 in most bullish Julys," James explained. "Bank Nifty has historically delivered an average return of 8.6% in Q2, with 60% of the year showing positive performance. Meanwhile, Nifty 50 has been positive 73% of the time in Q2, with an average return of 7%."
Also Read | Nifty breaks out of 31-day consolidation cage. Will stock market hit record high this week?
Multiple Catalysts Align
Beyond seasonality, several fundamental factors are supporting the bullish case. Crude oil prices fell over 11% this week, easing inflation concerns, while the rupee appreciated 1.3%, its best weekly gain since January 2023.
"Markets appear upbeat, backed by falling crude, a strong rupee, and stable global sentiment," observed Vikram Kasat, Head of Advisory at PL Capital. "Watch for macroeconomic cues—domestic inflation data, FII flow trends, and the impact of monsoon patterns—to guide the next move."
The global backdrop is also supportive, with the rally underpinned by easing geopolitical tensions in the Middle East and speculation around potential US Federal Reserve rate cuts as early as July. On Wall Street, the S&P 500 and Nasdaq hit all-time closing highs as trade deal hopes fueled investor risk appetite.
Earnings Season Adds Another Layer
The approaching first-quarter earnings season is providing additional fuel for optimism. "As the first-quarter earnings season draws near, investors are turning their focus to corporate results for early indications of growth trends," said Vinod Nair, Head of Research at Geojit Investments Limited.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, expects the momentum to continue: "We expect the market to witness a steady uptrend, supported by improving institutional inflows, prospects of a US-India trade deal, and sectoral tailwinds from RBI's liquidity measures and an above-average monsoon forecast."
With FII flows surging, technical indicators flashing green, oil prices crashing, and earnings season approaching, July 2025 has all the ingredients needed to extend the Nifty's remarkable July winning streak.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
The track record is compelling: only 2019 saw July turn red with a 5.69% loss, while stellar performances like 2022's 8.73% surge and 2020's 7.49% rally have cemented July as a month when bulls traditionally dominate Dalal Street.
The July Effect in Full Display
The historical data paints a picture of remarkable consistency. Over the past decade, July has delivered gains ranging from a modest 0.26% in 2021 to a spectacular 8.73% in 2022. Even in challenging years, the month has largely held its ground. 2024's 3.92% return and 2023's 2.94% gain proving that July's bullish bias remains intact.
"Historically, July has been a bullish month for both the Nifty 50 and Bank Nifty indices. This trend is often attributed to a post-June recovery and as early Q1 earnings optimism tends to fuel investor sentiment," Anand James, Chief Market Strategist at Geojit Financial Services, told ETMarkets.
What makes this July potentially special is the return of foreign institutional investors (FIIs) with renewed conviction. "FIIs have now turned net buyers for the fourth consecutive month, signaling a steady return of confidence in Indian equities," said Sudeep Shah, Head of Technical & Derivatives Research at SBI Securities.
The numbers back up this optimism. FIIs made a spectacular comeback as net buyers Thursday, with equity inflows exceeding ₹12,500 crore, the highest single-day buying in eight months. This surge came as US President Trump hinted at significant progress in US-India trade negotiations.
"Notably, in the derivatives segment, the FII long-short ratio in index futures has climbed to 38.43%, marking one of the highest levels seen in the recent past," Shah added. "A rising long-short ratio indicates that FIIs are increasingly building long positions—a bullish sign that suggests they are anticipating further upside in the near term."
Also Read | Rs 1 lakh crore selloff tsunami threatens Nifty rally as promoters, strategic investors exit
Technical Momentum Building
The technical picture is equally compelling, with market internals suggesting sustained buying interest across the board.
"July continues to look favourable for Nifty, supported by strong internal breadth and leadership from Bank Nifty," noted James. "In terms of trend strength, 100% of Bank Nifty stocks are above the 10-DMA, 83.33% above the 20-DMA, and 91.67% above the 50-DMA—a clear indication of persistent buying."
The Nifty's internals are similarly robust: "82% of its stocks are above the 10-DMA, 86% above the 20-DMA, and 78% above the 50-DMA," James revealed. "Looking at weekly performance, Bank Nifty and Nifty 50 show dominant price action, with 84% of Nifty 50 and 100% of Bank Nifty closing above the previous week's close, confirming solid upward momentum."
The Nifty Bank has already given a preview of what July might hold, hitting a fresh record high of 57,475.40 on Friday. This sectoral leadership often precedes broader market breakouts, with banks historically outperforming during bullish July periods.
"Bank Nifty, known for its higher beta and sensitivity to economic cues, has outperformed Nifty 50 in most bullish Julys," James explained. "Bank Nifty has historically delivered an average return of 8.6% in Q2, with 60% of the year showing positive performance. Meanwhile, Nifty 50 has been positive 73% of the time in Q2, with an average return of 7%."
Also Read | Nifty breaks out of 31-day consolidation cage. Will stock market hit record high this week?
Multiple Catalysts Align
Beyond seasonality, several fundamental factors are supporting the bullish case. Crude oil prices fell over 11% this week, easing inflation concerns, while the rupee appreciated 1.3%, its best weekly gain since January 2023.
"Markets appear upbeat, backed by falling crude, a strong rupee, and stable global sentiment," observed Vikram Kasat, Head of Advisory at PL Capital. "Watch for macroeconomic cues—domestic inflation data, FII flow trends, and the impact of monsoon patterns—to guide the next move."
The global backdrop is also supportive, with the rally underpinned by easing geopolitical tensions in the Middle East and speculation around potential US Federal Reserve rate cuts as early as July. On Wall Street, the S&P 500 and Nasdaq hit all-time closing highs as trade deal hopes fueled investor risk appetite.
Earnings Season Adds Another Layer
The approaching first-quarter earnings season is providing additional fuel for optimism. "As the first-quarter earnings season draws near, investors are turning their focus to corporate results for early indications of growth trends," said Vinod Nair, Head of Research at Geojit Investments Limited.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, expects the momentum to continue: "We expect the market to witness a steady uptrend, supported by improving institutional inflows, prospects of a US-India trade deal, and sectoral tailwinds from RBI's liquidity measures and an above-average monsoon forecast."
With FII flows surging, technical indicators flashing green, oil prices crashing, and earnings season approaching, July 2025 has all the ingredients needed to extend the Nifty's remarkable July winning streak.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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