Can July Deliver Again? History Says Yes, but What the Market and Fundamentals Say

If market returns had a calendar, July would be circled in green. A decade of historical data validates July’s stature as the golden month for equity returns, and this year’s run might just be another trophy in the cabinet. With the 26,000 milestone now in sight, bulls on Dalal Street are gearing up with mojo, with July’s strong seasonality sitting right by the side.

July has largely been kind to equity investors for over a decade, delivering positive returns of an average 5% in nine out of ten times. Early trends for July suggest a similar show in the making as the benchmark Nifty 50 has already broken out of a five-week consolidation phase to reclaim territory above 25,600, a nine-month peak.

This comes after five weeks of range bound trade for the Nifty. The headline index traded in a tight range, alternating between gains and losses, as investors struggled to find a direction.

The index had touched 26,000-mark for the first and only time in September, after which it had taken investors on a roller-coaster ride, plummeting to a low of 21,743 points in April, which left portfolios gasping for breath.

Although Nifty’s recent rally reflects strong momentum, breaching 26,000 in July will hinge on global cues. Risks from US-Iran tensions and the upcoming Federal Reserve meeting could likely prompt profit booking, Amit Jain, co-founder, Ashika Global Family Office Services, said. The bias remains upward, though the journey may be uneven and Nifty may test 26,000 intraday or intraweek, but sustaining above it depends on how global events unfold, he added.

History Has A Bullish Blueprint

Over the past 10 years, the Nifty has delivered positive returns in July, nine out of ten times. Only once, in 2019, did the month end in the red, and that too with a 6% dip. Contrastingly, in 2022 and 2020, July gave the highest returns of 9% and 7.5%, respectively. With its stellar past, July has proven to be a month when bulls traditionally dominate Dalal Street, as per the data compiled for the last 10 years.

In the last 10 years, July month has delivered gains ranging from a modest 0.3% in 2021 to a near 9% in 2022. Now, with June ending on a strong note, including a 2% gain in the last week and the highest single-day FPI inflow in eight months, the “July effect” might already be in motion.

Foreign investors pumped more than Rs 13,107 crore into Indian equity markets last week amid easing global geopolitical and trade tensions, according to data from the NSDL website.

Building on the bullishness, the rollover of positions to the July futures and options series paint a similar rosy picture. For the July F&O series, Nifty futures saw rollovers at 80%, slightly higher than the three-month average of 78%. 

More Than Just a Calendar Effect

It is not just a seasonal optimism that is fueling the rally. A cocktail of macro and geopolitical tailwinds are also boosting investors’ confidence. The de-escalation of tensions in West Asia, a sharp 11% drop in global crude oil prices, and an appreciating rupee are offering fertile ground for risk-on sentiment to re-grow. While the falling crude oil prices are harmful for the upstream oil companies, it did ease inflation concerns along with giving a leg up to the domestic currency, which saw its best weekly gain since January 2023.

Additionally, the anticipation of corporate earnings for the June quarter of FY26 and a supportive domestic economy will drive investors’ bets on July returns.

Derivatives Paint a Picture of Optimism

Technical indicators also reflect defined boundaries. “In the derivatives space, heavy call writing at 26,000 and put support at 25,500 indicates a defined short-term trading range for the Nifty between 25,500 and 26,000,” Sumeet Bagadia, executive director at Choice Broking, had said in a report.

“We expect a steady July for Indian equities with a 2–4% upside, provided global conditions don’t worsen. Markets will track earnings quality and Fed signals more than headlines,” Amit Jain said.

While 25,670 halted Friday’s rally as expected, many Nifty 50 stocks quickly retreated from their highs, suggesting a possible consolidation this week, Anand James, Chief Market Strategist at Geojit Investments, said. The index may find support around 25,550, but for the week, watch 25,440 and 25,300 as key downside levels, and the near-term target of 26,200–26,500 still remains, he added.