The global environment became somewhat less adverse in June and early July than had seemed likely in April and May, but it did not return to normal. Partial reopening of the Strait of Hormuz and intermittent de-escalation between the US and Iran reduced immediate concern around energy supply and helped crude oil retreat from its earlier peak, but renewed hostilities in early July, following the collapse of the interim ceasefire, were a reminder that the underlying shock had not gone away. Even as global attention briefly shifted to Spain’s World Cup win, the macro adjustment remained incomplete. For India, as we have pointed out earlier, two forces continue to shape macro and markets through much of this year: West Asia and the South-West monsoon. The first eased only at the margin, and the second became more worrying. This interaction between oil and rain is now central to the policy balance
The global macro backdrop remains difficult. The IMF’s July 2026 update projects global growth at 3.0% in 2026, improving to 3.4% in 2027, but with headline inflation revised higher to 4.7% in 2026 before moderating to 3.9% in 2027. Growth is increasingly dependent on a narrow set of supports: AI-led investment, technology exports, fiscal support and favourable terms of trade for energy exporters. Central banks have responded accordingly. The Fed and the Bank of England have remained on hold, while the Bank of Japan and the Reserve Bank of New Zealand have continued to tighten amid persistent inflation risks. Oil prices eased from their earlier peak, but volatility remained high, and inflation expectations stayed sensitive to food and commodity prices. The global easing cycle has therefore lost momentum.
Markets reflected this mixed backdrop. Global equities lost momentum in June after two months of strong gains. The MSCI World Index fell 0.7% in US dollar terms, while the MSCI Emerging Markets Index declined 1.4%. Profit-taking in technology stocks, a stronger US dollar and cautious central-bank signals offset the benefit of lower energy prices. In the US, technology-heavy indices came under pressure as investors reassessed the returns from large AI-related investments, while financials, industrials and other value-oriented sectors held up better. European equities outperformed on easing energy-related inflation concerns. In Asia, Japan and Taiwan remained relatively resilient on semiconductor strength, while China gained modestly
Indian equities, in contrast, recovered modestly after the pullback in May. The Nifty 50 rose 1.4% in June and gained a further 0.9% in the first half of July, although it remained down 7.9% on a calendar-year-to-date basis as of July 15. West Asia tensions intensified briefly early in the month, but subsequent indications of a possible ceasefire reduced concern over energy supplies and contributed to a 21% decline in crude prices in June. That relief proved temporary, with Brent returning towards US$93/bbl as hostilities resumed in July. Even so, the June easing in crude, some recovery in the INR and policy measures aimed at stabilising foreign flows helped domestic sentiment. Broader markets remained resilient, with the Nifty Midcap 150 and Nifty Smallcap 250 rising 0.9% and 4.3%, respectively.
The flow picture remained familiar, though with some improvement at the margin. FPI outflows stayed high at US$5.2 bn in June, but the trend reversed from mid-month and inflows continued into July. DIIs remained the principal anchor, recording net purchases of Rs 85,800 crore in June and extending their buying streak to 35 months. Domestic institutions have therefore continued to absorb foreign selling, helping stabilise the market even as the external backdrop remains uncertain. In fixed income, Indian bonds strengthened more clearly. The benchmark 10-year G-sec yield declined by around 25 bps to 6.75%, supported by lower crude prices during June, rupee appreciation, surplus liquidity and improving foreign demand
India’s macroeconomic picture through Q1FY27 appears to have held up better than feared. High-frequency indicators such as PMIs, auto sales, fuel consumption, bank credit and power demand remained broadly supportive, though some sectors such as aviation saw temporary disruption. FY26 GDP growth came in at 7.7%, while the Centre also met its fiscal deficit target of 4.4% of GDP. The current account deficit for Q4 surprised on the upside at around 0.7% of GDP. The move to monthly balance-of-payments data, together with the revision of key macroeconomic series, should improve policy visibility
That said, the easing in West Asia has not removed the broader strain. The rupee had earlier come under pressure from oil, gold and capital outflows, and recent policy measures by the Government and the RBI provided near-term comfort. Possible bond index inclusion and expected FCNR(B) inflows may continue to support the currency and bond yields. As of July 17, 2026, total forex inflows, including FCNR(B) deposits, OFCBs and ECBs, amounted to a cumulative US$20.7 bn. The room for policy support is narrower than before, however. The cost of cushioning the external shock is now visible in the fiscal accounts. Lower excise duty collections following fuel-duty cuts and a sharp increase in subsidy expenditure pushed the fiscal deficit to 9.6% of the FY27 Budget Estimate in the first two months of the year. The more immediate domestic risk now lies with the monsoon. As of July 16, cumulative rainfall was 24% below normal, with kharif sowing down 16% from the corresponding period last year., raising risks to farm output, rural incomes and food inflation in the coming quarters.
This month’s Story of the Month steps away from the quarter and looks at twenty-six years of corporate India. The composition and performance of the Nifty 500 point to a substantial structural shift—from a commodity- and manufacturing-heavy universe at the turn of the millennium to one increasingly driven by financial intermediation, services and domestic demand. Financials have been the defining structural growth story, rising from 8% of index constituents and 7% of market capitalisation in March 2000 to 20% and 26%, respectively, by March 2026. The sector also overtook Energy as the largest contributor to revenues in FY25. Traditional sectors such as Materials and Consumer Staples ceded ground over time, while Health Care, Utilities and Consumer Discretionary gained prominence.
Beyond sector transition over time, corporate performance has been visible in scale, profitability and breadth. Between FY03 and FY26, aggregate net sales of Nifty 500 companies increased 21-fold, while PAT rose 31-fold. Aggregate PAT margins improved from 6.0% in FY00 to 10.9% in FY26. Equally important, corporate performance broadened beyond the largest index names. The Nifty 50’s share of aggregate Nifty 500 profits fell from 87% in FY18 to 51% in FY26, while the broader universe delivered faster profit growth than the top 50. Concentration indicators tell the same story: the HHI for net sales, EBITDA and PAT all declined materially over time. The longer view therefore points to a corporate universe that is not only larger, but also deeper and less concentrated.
Our Insights section this month turns to capital raising and the frictions, asymmetries and institutions that shape it. The literature begins with the Modigliani–Miller benchmark, but its main contribution lies in explaining why that benchmark fails in practice. Information asymmetries, agency conflicts and credit rationing shape financing choices at the firm level. Venture capital and IPO markets shape the transition from private to public ownership. At a broader level, investor protection, macroeconomic credibility and financial openness determine how deep and efficient capital markets become. The common thread is straightforward: beyond markets, efficient capital allocation depends on institutions that reduce frictions and support confidence.
Exchange data for Q1FY27 show both resilience and normalisation. Capital mobilisation reached a record monthly high in June 2026, led by strong debt issuances, particularly commercial paper, along with increased preferential allotments. Even so, primary market activity remained measured in the first quarter, with IPO listings moderating compared with the same period last year. The registered investor base crossed 13.2 crore, though the pace of new registrations continued to normalise from the exceptional post-pandemic surge. The cash segment recorded healthy growth in turnover, equity derivatives moderated further, and commodity derivatives continued to gain momentum, particularly in crude oil options. Trading activity remained highly concentrated among a small set of larger participants.
That is what makes July distinct from the previous few months. The first phase of the external shock has passed, and some of the associated financial strain has eased, but the broader macro setting remains fragile. India nevertheless enters this phase relatively better placed than many emerging and developed economies: growth has held up, the fiscal deficit remains contained, the current account is manageable, domestic flows continue to offset foreign selling, and the financial system retains room to respond. These strengths provide a stronger base for the economy to withstand external or weather-related shocks. The task ahead is to preserve that advantage—by retaining policy flexibility, strengthening buffers and preparing for a wider range of outcomes. As Dwight Eisenhower observed, “Plans are worthless, but planning is everything.”
The July 2026 edition of the NSE Market Pulse can be accessed at the following link
https://nsearchives.nseindia.com//web/mediaattachment/2026-07/Market_Pulse_July_2026.pdf
Tirthankar Patnaik, PhD
Chief Economist
National Stock Exchange of India Limited (NSE)
Inspire BKC, Main Road, G Block, Bandra-Kurla Complex, Bandra (East),
Mumbai – 400051, India
Tel: +91 22 26598149 | Mobile: +91 9819016382, +91-8665647736
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