Historical data suggests bulls dominate July; will 2019 be a repeat?

After a tepid June, the month of July might bring cheers to market participants as bulls may make a comeback. In the last 11 years, bulls have dominated the D-Street in July.

Sensex rallied 10 percent in July 2008, followed by 7 percent in July 2009. In 2019, the index surged over 6 percent in the month.

After hitting record highs exactly a month ago, Sensex at the beginning of July is 700 points away from its life high. Investors are looking for a breakout on either side and the upcoming Budget would be crucial.

Most experts feel that Nifty may be close to forming an intermediate top above 12,103-12,250. The downside still remains limited in case Budget 2019 fails to lift sentiment.

“Well, we can’t say that the Nifty has formed an intermediate top with the ending of June series as we could see another top that would be likely placed at 12,250 in coming trading sessions,” Sumeet Bagadia, Executive Director, Choice Broking, told Moneycontrol.

“On a daily chart, after forming runway gap, Nifty is continuously trading above its gap range along with the support of 50-DMA, which suggests a northward movement may take place,” he said.

Bagadia further added that for a shorter time, Nifty has formed a base near to 11,650 while upside resistance comes at 11,850. An overall range that we are seeing is 11,600-12,250.

Foreign institutional investors (FIIs) poured in more than Rs 10,000 crore in equity and debt segments of Indian markets in June and the trend should continue in July, based on historical data.

History suggests that FIIs were net buyers in Indian markets in 9 out of the last 11 years. They poured in more than Rs 17,000 crore in July 2010, followed by over Rs 11,000 crore in July 2009 and 2016, each. Mutual funds were also net buyers in Indian markets in seven out of the last 11 years.

What to watch out for

The big event to watch out is Budget on July 5, but there are other factors that investors should keep an eye on this month.

Apart from US-China trade talks, forthcoming Budget along with various measures that could be part of 100-day agenda of Modi 2.0 is the most eagerly awaited events ahead, suggest experts.

“Participants will react to the outcome of G20 meet and hopes are high that the world leaders would reach to an agreement to deescalate the trade war tension and geopolitical issues,” Jayant Manglik, President, Religare Broking Ltd told Moneycontrol.

“Besides, the monthly sales data of auto and cement companies will also start pouring in. Above all, we’ve Union Budget on July 5, the first after the re-election of NDA government. We expect the budget to be pro-growth given the decelerating economic growth and rising unemployment rate,” he said.

Apart from the Union Budget, the market would also keep an eye on the recommendation of the Bimal Jalan Committee on the central bank's economic capital framework.

“Amount of excess funds to be transferred by the RBI and the conditions attached to it would be closely analyzed keeping in mind the fiscal position of the government,” said Bagadia.

“Also, Niti Aayog's view on the EVs and progress of South-West monsoon would be actively tracked by the market. On the global front, developments on US-China trade talks and outcome from scheduled OPEC meeting would be tracked by the investor community,” he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.