Dear Investors,
The market again turned volatile in July 2025 due to global trade uncertainties, especially Trump administration's tariffs on India's exports to the US. Though President Trump's announcement of 25% tariff in India's exports came on 30th July, the market has been discounting the possibility of tariffs in stock prices since Nifty has fallen nearly 980 points in the last 1 month. Nifty closed July at 24,768 while the Sensex closed at 81,186. Both the Sensex and Nifty declined by around 3% in July 2025. The broad market (Nifty 500 which includes midcaps and small caps) also fell by about 3%. FII flows turned negative with net sales of around Rs 17,700 crores in the month of July. Mutual funds continued to support the market with Rs 46,500 crores of net purchases. Almost all industry sectors were in red in the month of July. IT, Telecom, Realty, Capital Goods and Infrastructure were among the worst hits. Defensive sectors like FMCG and healthcare were relatively better performers
As far as global markets are concerned, S&P 500 rose by 2.6%, while NASDAQ rallied nearly 3%. Hang Seng rose by 1.85%. Among other international markets, Nikkei and FTSE gained, while CAC declined in July. The German market index, DAX was flat. Rapidly shifting geopolitical dynamics is a major risk factor for global equity markets. The Trump Administration's sudden announcement on tariffs effective from 1st August was a shock and we may see continuing volatility in the market. The impact of 25% tariff on various sectors needs to estimated. While the impact may be limited for some sectors, some sectors may be more severely affected. The impact of new wave of US and EU sanctions on Russian oil is another risk factor. If importers of Russian oil shift to other sources like Middle East or the United States to avoid sanctions, then we may see crude prices rising which will then have an effect on both fiscal deficit and inflation. There is a still room for negotiation with the US and arrive at a mutually acceptable solution, while protecting India's interest to a large extent. We have seen this in US and China trade talks.
Treasury bond yields rose in the United States and US Dollar weakened due to concerns about rising fiscal deficits in India. Creeping US Treasury Bond yields is putting pressure on Indian bond market and firming of bond yields despite rate cuts by the RBI. The 10-year G-Sec yield crept up by 6 bps, while short term (1 year G-Sec yield) remained flat despite inflation coming down. In its June Monetary Policy Committee meeting, the RBI changed its policy stance from accommodative to neutral. But growing macro-economic concerns due to tariffs may force RBI to cut interest rates later this year.
Precious metals continued to rise in July with Gold prices rising 3.1%. Silver prices rallied by 7.3% making it the best performing asset class in June. Precious metal prices are likely to rise further due to central banks' gold purchase and global trade uncertainties.
While the valuations are lower than long term historical average, corporate earnings will have to provide support to the market. From a long-term perspective favourable macro driven by strong / resilient GDP growth, rising per capita income, domestic consumption driven economy, expected surge in private sector capex spending on the back of Government spending on infrastructure etc make the outlook for Indian equities positive. Investors should have long investment horizon and continue to invest in a disciplined way, with focus on asset allocation and quality.
Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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