India stocks post best monthly gain since April as foreign inflows return
Indian equities ended July with their strongest monthly gain since April as foreign investors bought shares for the first time in five months, though surging crude prices keep the benchmark index trapped in a tight range.
Indian benchmark indices rallied to close out July, logging their best monthly performance since April. The Nifty climbed 2.1% for the month and gained more than 2.5% over the past week, driven by a surprise shift in foreign capital flows. Foreign portfolio investors purchased over Rs 10,000 crore of Indian equities this month, marking their first net buying since February.
This renewed foreign interest comes despite a sharp escalation in oil prices that typically pressures Indian markets. Brent crude futures surged to $90 per barrel on Friday from $71.6 at the start of July. The rising energy costs, tied to geopolitical tensions in West Asia, have kept the Nifty constrained within a five-week trading band of 23,750 to 24,450.
“Despite Nifty ending the week higher, it has been unable to break out of its five-week range of 23,750-24,450, indicating continued indecision among market participants,” said Gaurav Sharma, head of research at Globe Capital Market. “While we remain uncomfortable with oil prices above $80 per barrel and escalation in the West Asia conflict, the earnings season has been better than expected despite a quarter marked by multiple disruptions and higher raw material costs.”
Corporate earnings have provided a crucial floor for the market. The information technology sector was a standout, with the Nifty IT index jumping 6.8% for the week. This divergence was notable as the South Korean Kospi, a proxy for global tech and semiconductor sentiment, fell 3.1% over the same period.
“We also believe the IT sector delivered better-than-expected results this quarter and is not lagging in the AI race. So, it should continue to outperform regardless of the performance of the Kospi or other AI and semiconductor stocks,” Sharma said.
Banking sector drags on broader breakout
While pharma and IT stocks led the advance, the banking sector remains a notable laggard. Analysts point out that sustained selling pressure in the Bank Nifty is preventing a broader market breakout.
Domestic institutional investors have stepped up to absorb foreign and retail profit-taking. On Friday alone, domestic institutions bought shares worth Rs 2,260 crore, compared to Rs 277 crore from foreign investors. Broader market sentiment remained positive, with 2,522 advancing stocks outpacing 1,722 decliners on the BSE.
Traders are watching the 24,500 level as the immediate ceiling. “We believe that unless the index breaks above 24,500 and closes above that level, it is likely to remain range-bound and witness a sideways movement,” analysts at Angel One said. “We continue to see profit booking in the 24,430-24,450 zone.”
The India VIX dropped 3.3% to 11.76 on Friday and has fallen 12.2% over the last five sessions, reflecting easing anxiety among derivatives traders. Elsewhere in the region, most major Asian markets posted weekly gains, led by a 17.9% surge in South Korea and an 8% jump in Taiwan.
