Topic 1: POSITIVE VIBES WITH TWIST

July 2024 was a month of heightened volatility for Indian stock markets. The confluence of the budget's tax changes, and the income tax return deadline created uncertainty among investors. Uncertainty prevailed over the stock markets as investors were hesitant about how the new tax regime would affect their investments, leading to fluctuations in stock prices and overall market performance. Despite of that still markets in July 2024, both the BSE Sensex and NSE Nifty showed remarkable performance, reaching all-time highs by the end of the month. The BSE Sensex closed at 81,741.34 on July 31, 2024, reflecting a gain of 285.94 points or 0.35% for that day. Throughout the month, it saw significant increases, including a notable rise of 1,292.92 points or 1.62% on July 26, when it closed at 81,332.72. On the other hand, the Nifty 50 finished at 24,951.15 on July 31, up by 93.85 points or 0.38%. The Nifty also reached a peak of 24,999.75 during the month, closing at an all-time high of 24,834.85 on July 26, marking an increase of 428.75 points or 1.76% from the previous close. The IT sector thrived on anticipation of US Fed rate cuts, contributing to overall market positivity. Certain sectors, such as metals and IT, exhibited particularly strong performances, contributing to the overall gains in the Sensex and Nifty. But the markets also faced some volatility, with the Sensex falling over 500 points on July 10 due to changes in the government's ethanol blending policy and raw material cost volatility.

Foreign Institutional Investors (FIIs) exhibited a mixed trend in their investments in the Indian stock markets during July 2024. FIIs net bought shares worth Rs 25,108.69 crore until July 22, 2024, showing strong buying interest in the initial part of the month. However, in the next three trading sessions after the Union Budget 2024 was presented on July 23, FIIs resorted to offloading positions and net sold shares worth Rs 10,711.70 crore. This brought down their net monthly purchases to Rs 14,396.99 crore thus far in July, despite still being the highest net inflow in a single month since the last 13 months. The sudden reversal in FII sentiment in late July was driven by changes in the treatment of capital gains for listed, unlisted and compulsory convertible debentures (CCDs) in the budget. The increase in short-term capital gains tax from 15% to 20% and long-term capital gains tax from 10% to 12.5% impacted FII flows. In coming months, FIIs will assess their stance in Indian markets depending on the factors like corporate earnings growth, global central bank policies, geopolitics and the upcoming US presidential election.

The Indian rupee exhibited a mixed performance against the US dollar in July 2024. The rupee traded in a narrow range, a situation not seen in almost thirty years. This stability was attributed to the Reserve Bank of India's firm control over the currency's fluctuations, supported by its substantial foreign exchange reserves. While the rupee saw some volatility in early July, it largely traded in a tight range for the rest of the month due to RBI intervention and stable foreign inflows, with forecasts suggesting a modest appreciation against the US dollar in the coming months.

In July 2024, gold prices in India experienced notable fluctuations, reflecting a mix of global economic factors and domestic market dynamics. Domestic gold prices dropped by nearly 5% on July 26, 2024, with 22-carat gold prices falling to ₹67,700 per 10 grams from a high of ₹74,700 on July 17. This unprecedented drop marked the sixth largest wealth erosion in Indian market history. The major factors behind this erosion are attributed to the Budget 2024 on July 23, announcing a cut in the basic customs duty on gold, silver and platinum from 15% to 6% and also global gold price declines more than 1% due to profit booking by investors as they awaited key US economic data and clues on Fed rate cuts.

In July 2024, crude oil prices in India largely traded in a range around ₹6,400 per barrel in July 2024, with global factors like refinery throughputs, demand from China and OPEC forecasts influencing the price movements. The overall trend was one of stability compared to the sharp fluctuations seen in some previous months.

The Indian stock market is poised for a turbulent August. While positive factors like the anticipated Fed rate cut in September and strong performance in IT, metals, and energy sectors offer some support, several challenges could dampen investor sentiment. Lacklustre Q1 FY25 earnings, coupled with potential profit-booking and consolidation in global markets, may exert downward pressure. Additionally, the rupee's depreciation against the US dollar could trigger capital outflows. These factors combined are likely to introduce volatility and create headwinds for the Indian market in the coming month.