Indian stock market registers broader rally in the last three out of four months. Can the momentum continue?

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The domestic stock market's performance has been remarkably resilient in the recent past despite crude oil price volatility, the ongoing US-Iran conflict, and concerns over possible monetary tightening.
According to the LiveMint data research, the key benchmark index Nifty 50 gained 2.2% in July, extending gains for the second consecutive month, while the Nifty Midcap 100 clocked a gain of 1.8%. The Nifty Smallcap 100 outperformed, rising 2.5% for the month.
While the Nifty 50 index is down nearly 7% year-to-date, it has clocked gains in three out of the last four months. In April, the index jumped 7.5%, snapping its four-month losing streak, followed by a 2% decline in May. In the month of June and July 2026, the LiveMint research says that the 50-stock index gained 1.40% and 2.20% respectively. However, in May 2026, the inex shed 1.90%.
As said earlier, the rally has been broad-based, as the Nifty Midcap 100 and Small-cap 100 have also gained in all four months.
In April 2026, Nifty Midcap 100 index shot up 13.60%, whereas in the month of June and July, the index ascended 0.10% and 1.80% respectively. In May 2026 too, the index had registered 3.20% gain.
Likewise, the Nifty Smallcap index appreciated 18.40% in April 2026, while the index went up 4% and 2.50% respectively in June and July. In May 2026, the index had registered 0.70% gain.
The uptrend seen in the domestic market over the last two months can be attributed to a decline in crude oil prices, better-than-expected Q1 earnings, and easing AI-trade.
Brent crude was above $120 per barrel in May, but a ceasefire between the US and Iran dragged it to near $70 per barrel in subsequent months.
In May and June, Brent crude futures dropped up to 20%, easing macroeconomic concerns. July, however, saw an over 20% jump in Brent crude due to renewed tensions between the US and Iran. Still, crude prices remain below the $100 per barrel mark now.
Foreign portfolio investors (FPIs) bought Indian equities worth ₹20,200 crore in July, after selling since March. Lower oil prices, better quarterly earnings, and growing concerns over lofty valuations of AI and chip stocks attracted FPIs to Indian markets, which offer opportunities in many sectors.
"The encouraging part is that FPIs have turned positive since the second half of June. They invested around ₹15,000 crore in the latter half of June and another ₹20,000 crore in July," said Pankaj Pandey, the head of research at ICICI Securities.
"Corporate earnings have been better than expected. The market was anticipating single-digit earnings growth, but companies have delivered healthy double-digit growth. So, overall, the outlook is becoming incrementally more positive," said Pandey.
The key challenge remains elevated crude oil prices, which are preventing the market from moving significantly higher.
The US-Iran conflict is unresolved. Moreover, one or two US Fed rate hikes are on the cards, and earnings have not yet picked up materially.
The inflation concern is largely linked to crude oil prices. The broader expectation is that crude prices will not remain elevated for an extended period. Once the geopolitical conflict eases, crude prices should moderate, reducing inflationary pressures.
Some experts believe all these headwinds are known to the markets and may even be discounted in the price.
Apurva Sheth, the head of market perspectives and research at SAMCO Securities, pointed out that the market hardly reacts to the same news twice.
Sheth underscored that the market's reactions this time, when crude oil touched $90, and the last time when the conflict erupted, and crude touched $90, are different.
"Our markets have remained resilient this time around, which shows that it's looking much ahead in the future. President Trump has limited incentive to continue with the war when the US Midterm elections are held in November," said Sheth.
"Quarterly earnings growth has not been bad despite the disruptions in the Strait of Hormuz. It might take a few more quarters to recover, but by the time it does, markets will have climbed the wall of worry and leave limited on the table for anyone who enters then," Sheth added.
Sheth remains constructive in the markets and recommends taking selective exposure in sectors like defence, pharma, metals, small-cap and mid-cap.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, also believes that in the near-term, the market may remain resilient, supported by the fair valuations in large caps and FIIs turning buyers.
"Despite the headwinds, the market appears set for a modest rally. It is likely to remain range-bound for some time and then break out on the upside. GDP growth is strong, and credit growth is robust at around 18%. The auto sector is doing very well, and demand in the sector continues to be buoyant. The market has not delivered any returns during the last two years, and this will not continue for long," said Vijayakumar.
Ajit Mishra, SVP of Research at Religare Broking, expects a phase of consolidation with a positive bias in the near term. He, however, added that any corrective dip is likely to offer a buying opportunity rather than signal a change in the broader trend.
"Participants should maintain their focus on sectors and themes, which are showing an improving earnings trend and accumulate them on dips in a staggered manner," said Mishra.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
Niti Kiran is a Deputy Editor at Mint with over a decade of expertise in corporate and market research. She specializes in uncovering the subtle corporate and market trends that others may miss, driven by a career-long fascination with the stories hidden within the numbers. Her journey began at the Centre for Monitoring Indian Economy (CMIE), where she first developed the rigorous analytical lens that has come to define her reporting. Niti is a data specialist who excels at spotting trends, with her precision rooted in an academic background in mathematics and a Master’s in business finance. Her ‘hands-on’ approach to storytelling is supported by extensive experience across institutional databases, allowing her to extract actionable insights with precision. This technical foundation enables her to transform raw data into insightful, high-impact data journalism that has earned her consistent editorial recognition. Beyond the terminal and the newsroom, she finds balance by spending quality time with her family and exploring her interest in diverse cuisines—approaching the world of culinary flavours with the same keen eye for detail she brings to her market analysis.
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