Market rally ends as Sensex, Nifty fall on FPI selloff, weak earnings

The domestic equity markets faced turbulence in July, breaking a four-month winning streak that stretched from March to June and had propelled benchmark indices nearly 15 per cent higher. Both Nifty and Sensex ended July down about 3 per cent. The broader Nifty Smallcap 100 and Nifty Midcap 100 indices dropped 6.7 per cent and 4 per cent, respectively. During the preceding four months, the two indices had jumped over 20 per cent each. 

The rally came to an abrupt halt due to lackluster corporate earnings, persistent selling by foreign investors, and renewed uncertainty surrounding US trade negotiations. India’s total market capitalisation fell by ₹11.5 trillion during the month, settling at ₹450 trillion ($5.14 trillion). 

Indian equities lagged most global peers in July as sluggish earnings momentum cast a shadow over their already premium valuations compared to other emerging markets. 

With the exception of FMCG and pharmaceuticals, all sectoral indices ended the month in the red, with the IT sector leading declines, sinking by nearly 10 per cent. Notable outliers among Nifty constituents included Eternal, which surged 17 per cent, and Hindustan Unilever, up 10 per cent. 

Foreign portfolio investors (FPIs) offloaded nearly ₹20,000 crore in equities in July, while domestic institutional investors stepped in, purchasing over ₹50,000 crore worth of shares.