Equity Market Forecast for July 2025

The unrest in the Middle East caused fluctuations in oil prices and instability in global stock markets in June. Simultaneously, uncertainty loomed over the Trump administration’s tariff announcements.

Looking ahead to July, what developments could potentially impact the markets and in what direction might the equity markets proceed?

Insight into the morning provided by Nikhil Roongta from LIC MF, Sorbh Gupta from Bajaj Finserv MF, along with Trupti Agrawal from WhiteOak Capital MF, share their perspectives on the current situation of the equity market and its forthcoming outlook.

July’s Key Forecasts:

Foremost in the minds of these fund managers are the Q1FY26 earnings reports scheduled for release in July. Nikhil and Sorbh are also eagerly anticipating company management statements to gauge the market’s future perspective. Sorbh, in particular, is keen to understand the demand projection for the consumer sector ahead of the impending festive season.

After the Trump government’s 90-day tariff pause, which concludes on July 8, the fund managers are awaiting further announcements. Market reactions suggest a subdued impact on global growth, preceding the impending announcement, even though trade-related uncertainties linger.

Furthermore, heightened defense expenditure following the recent skirmish with Pakistan remains on Nikhil’s radar.

Medium-Term Projections:

Despite predicting market volatility, Nikhil maintains a favorable outlook on Indian stock markets, foreseeing growth in the high single-digit to low double-digit range over the next two years. He expects valuation multiples to retain an average position.

Sorbh acknowledges that rate reductions, enhanced liquidity, previous tax revisions in the budget, and the potential cyclical recovery in the Indian economy contribute to an enhanced outlook. His medium-term perspective on the equity market is optimistic, specifically for broader markets. Nonetheless, he advocates caution towards export-driven sectors due to uncertainties surrounding the U.S. economy. The performance of these companies may also be influenced by tariff-related developments.

Trupti anticipates global markets to mirror returns broadly aligned with nominal GDP growth plus dividend yield in the long run. Considering India’s anticipated low double-digit nominal GDP growth rate, similar returns are expected from Indian markets in rupee terms.

She points out that Indian markets offer substantial alpha generation potential compared to other significant global equity markets. Notably, India’s diverse mid- and small-cap segments are less researched and thus more inefficient, presenting an increased potential for alpha generation. Trupti underlines the uncertainties rooted in the evolving global geopolitical landscape and sharp market reversals.