NIFTY50 jumps over 3% in June amid external shocks; what's in store for July?

NIFTY50 gained 3% for June amid strong volatility encountered due to geopolitical tensions and a possibility of a fully blown-out war between Iran, Israel and the US. In addition, the trade war tensions kept the investors on the edge throughout the month. Domestic cues remained strong with lower inflation and signs of strong economic activity picking up, assuaged helped investors to stay resilient in the turbulent times.

Chart check for NIFTY50

NIFTY50 nearly formed a double top pattern on the monthly chart after hitting an 8-month high of 25,669 levels. The index is now trading nearly 2% away from the record high levels of 26,277. According to experts, the index could face some resistance at 26,200 levels and witness some profit booking before hitting new record high levels.

Apart from the benchmark indices, broader indices also performed well in June by outperforming the headline indices. The NIFTY midcap 100 and smallcap 100 gained over 4% and 6.6% in June, continuing the winning streak for the fourth consecutive month. Experts believe that the broader indices would continue to outperform the benchmark indices as the valuations remain in the affordable range and the Q1FY26 earnings would provide further cues to the index.

If NIFTY50 is set to hit the new records in June, here are the key factors that could lead the rally

Strong tailwinds for the economy

Despite the geopolitical instability, the Indian economy remained strong. The trade war headwinds are also expected to de-escalate as the bilateral trade agreement with the US is in the final stages and could be approved soon. This will eliminate the major global headwind for the economy. The domestic tailwinds like lower inflation, consistent and robust GDP growth above 6%, RBI’s major rate cut are expected to boost overall investor sentiments for the economy.

Q1FY26 earnings

The Q1FY26 earnings season will kickstart in the second week of June with prominent IT names like TCS, Infy announcing their quarterly results. The overall earnings season is expected to see moderate growth with some sectors outperforming others. Analysts expect banking and finance names to lead the earnings growth as the banking sector remains robust due to planned efforts by the Central Bank to eliminate risks in the microfinance sector, which was the major pain point for the banks. In addition, a rate cut is expected to aid higher double-digit credit growth in the quarter. Apart from the banking and financial, Pharmaceuticals, Metals and Auto may show moderate growth in the quarter.

Continued FII buying

Foreign Investors are net buyers of Indian equities for the third consecutive month. According to the NSDL data, foreign institutional investors have bought equities worth ₹8,915 crore as of 27th June. The buying reduced as compared to May 2025, when FIIs bought equities worth ₹19,860 crore. Trade war tensions, geopolitical risks could have deterred foreign investors from buying more in Indian equities. However, as headwinds cool off and strong tailwinds for the economy emerge, the foreign investors are expected to continue buying with increased strength in July.

Affordable valuations

Overvaluations in the Indian markets have remained a major concern for long-term investors, who, by nature, invest large sums of money for a longer period. These investors include institutional players, sovereign funds, AMCs and more. Indian markets have long stayed in over overvalued zone to their growth opportunities. After correcting more than 15% from the peak of 26,200, the benchmark NIFTY50 index saw sharp valuation contraction and provided major opportunities for long-term investors. After a 17% rise in the NIFTY50 from the recent lows of 21,743, the index remains in an affordable range as compared to last year.

At current levels of 25,630 as of June 27, the NIFTY’s price-to-earnings ratio stood at 23x, which is lower than 23.7x when NIFTY50 was at similar levels in October 2024. However, a little higher than the 3-year median of 22x.