EF Digest - July 2026

Dear Investors,

Market recovery was broad-based, with midcaps gaining 1%. The small-cap segment was standout performer, gaining nearly 4%. Most industry sectors were in the green in June 2026. Realty, financial services, healthcare, consumer durables, and automobiles outperformed the broad market index in June, while IT underperformed amidst global tech sell-off. FII sell-off continued in June with Rs 49,300 crores of net sales of Indian equities. This is the 4^th consecutive month when FII have been net sellers. In the first 6 months of CY 2026, FII have been net sellers for 5 months. Mutual funds continued to support the market with net inflows of Rs 53,000 crores.

Global markets rallied after the US and Iran signed a preliminary peace deal. The Sensex gained nearly 1,700 points (month-on-month) to close near 76,500. The Nifty gained 1.4% in June to close near 23,900. The Dow Jones gained 2.5%. Other leading markets, Nikkei (Japan), DAX (Germany), CAC (France) and FTSE (UK) were all in the green. However, tech stocks came under pressure towards the end of the month. Emerging markets underperformed versus developed markets in June, except for China. The Shanghai Composite gained 0.6% in June 2026.

Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25% in the June MPC meeting. The Marginal Standing Facility Rate (i.e., the rate at which commercial banks can borrow emergency funds from the RBI overnight) also remains unchanged at 5.5%. RBI’s monetary policy stance is neutral, which means that the central bank is carefully balancing growth and inflation. The 10-year G-Sec softened by 25 bps to around 6.75%. The yield curve steepened with the 364-Day T-Bill yield falling by 47 bps to 5.66%. The 91-day T-Bill yield also softened by 26 bps. The INR ended almost flat against the US dollar in June 2026. Hawkish US Federal Reserve monetary policy stances led to a decline in precious metal prices versus the USD. Gold prices fell by nearly 10% in June, while silver prices fell nearly 15%. WPI Inflation spiked up and factory output (IIP) jumped in May 2026.

On 17^th June 2026, the US Administration announced that it had reached a preliminary peace agreement with Iran. Brent crude oil prices dropped by nearly $12 a barrel. Global markets rallied on falling crude prices and hopes of the resumption of energy flows through the Strait of Hormuz. US dollar has been strengthening against major currencies. Hawkish US Federal Reserve monetary policy stances led to a decline in precious metal prices versus the USD. Gold prices fell by nearly 10% in June, while silver prices fell nearly 15%. Precious metal prices have an inverse relationship with US interest rates. Higher US interest rates / Treasury Bond yields make US Treasury Bonds more attractive investment options, as safe haven investments compared to precious metals.

Valuations have also come down across broader market cap segments, especially in large and midcap segments. Investors should continue mutual fund SIPs in mid and small cap funds, with a long investment horizon. The overall economic and market environment is uncertain. However, current valuations provide attractive entry points for long-term investors.

Market sentiment seems to be bullish, even though we may see a bout of profit-taking from time to time. In the past, the market has seen a V-shaped recovery from a deep correction (e.g., post-2008, post-COVID recoveries). The market is waiting for global and domestic cues to provide tailwinds for a sustained rally. While the Nifty has given negative returns this year, small caps have been outperforming, giving 6.4% returns in the first six months of the year in difficult market conditions. Since the markets are still below the all-time highs and valuations are reasonable, investments made at these levels may give higher returns in the long term. Investors should remain disciplined and continue to invest through SIP.

Assuring you of our best services.

Best Wishes,

Ajoy Agarwal,

(Managing Director)