Indian markets post second straight monthly gain as foreign investors return

Indian equity markets ended July on a positive note, with both benchmark indices recording their second consecutive monthly gain as stronger corporate earnings and renewed foreign investment lifted investor confidence. The Nifty 50 gained 2.2% during the month, while the Sensex advanced 2.1%, marking the first time this year that both indices have delivered back-to-back monthly gains.

The rally was driven by a combination of improving corporate performance, easing concerns around global technology valuations and a return of foreign portfolio investment into Indian equities. Foreign investors, who had withdrawn heavily from Indian markets during the first half of 2026, turned net buyers in July, providing fresh momentum to domestic stocks.

Information technology emerged as the best-performing sector, with the Nifty IT index jumping 16.8% during the month, its strongest monthly performance in six years. Large technology companies including Infosys, Tata Consultancy Services, HCLTech and Tech Mahindra benefited from improving investor sentiment as global markets shifted away from a narrow artificial intelligence-led rally towards companies with stable earnings and attractive valuations.

Financial and automobile stocks also supported the market’s advance. Bajaj Finance and Mahindra & Mahindra gained strongly after reporting better-than-expected quarterly results, reinforcing confidence in India’s domestic consumption story. Investors responded positively to earnings that demonstrated resilience despite global economic uncertainty and fluctuating commodity prices.

The positive performance came even as crude oil prices remained volatile due to geopolitical tensions in West Asia. Analysts noted that India’s improving corporate earnings and the Reserve Bank of India’s measures to support the rupee helped offset concerns over higher energy prices and external risks.

Small and mid-cap shares also participated in the rally, reflecting broad-based market strength rather than gains concentrated in a handful of large companies. This wider participation is viewed as a healthy sign for the equity market, indicating improving confidence across different sectors and market capitalisations.

For investors, July’s performance highlights the importance of fundamentals over short-term market sentiment. Companies delivering consistent earnings growth continued to attract buying interest, while sectors with improving outlooks outperformed broader indices. Analysts believe future market direction will depend on corporate earnings, inflation trends, interest rate expectations and the continuation of foreign investment flows.

Although global uncertainties remain, India’s strong domestic demand, expanding digital economy and stable macroeconomic environment continue to support long-term equity market prospects. Investors will now closely watch upcoming earnings announcements, economic data and global policy developments for fresh market direction.

With foreign capital returning and corporate earnings remaining resilient, Indian equities have entered the second half of 2026 on a stronger footing, providing optimism for investors despite an uncertain global backdrop.