Indian equities continued to rise for the fourth consecutive month in June, with the Sensex and Nifty rising 2.6-3%; cumulative gains for the period amounted to over 15% for both the benchmark indices. Vis-à-vis their April lows, they have recovered ~17.3%. June too was a story of two halves – though the month began with a bear grip, the momentum turned green soon, on encouraging global cues, return of FIIs and DIIs, improving macroeconomic fundamentals and corporate earnings, foreign fund inflows, a pause in US tariff policy and easing geopolitical tensions, boosted investor sentiment.

The Sensex has risen by more than 12,000 points in the past three months, making investors richer by over Rs. 73 lakh crore.

FIIs flocked back to Indian shores led by easing tensions in the Middle East that dragged down crude oil prices, consequently dragging the Dollar Index to a three-year low. FIIs thus turned net buyers in June, with total inflows standing at Rs. 8,466 crore. While FII inflows fluctuated throughout the month, DIIs, supported by mutual funds, steadily soaked up shares, pumping in over Rs. 60,000 crore. The RBI’s multiple interest rate cuts and its continued confidence in a domestically driven economy have restored much-needed investor confidence, pushing equities higher.

The June rally also saw a shift in investors’ mood, with large-cap stocks finding greater favour as compared to relatively expensive mid- and small-cap stocks. Among large-caps too, bank and NBFC stocks shone well, buoyed by the RBI’s surprise 50 bps repo rate cut and a 100-bps CRR cut.

What lies ahead? The rally’s sustainability hinges on further developments in the global tariff game, with the Trump administration stating that trade penalties will take effect unless agreements are reached with respective trading partners.

The Q1FY26 earnings season would be the next cylinder that equities would fire on, led by multiple factors including a low base effect, tailwinds arising from the RBI’s three successive rate cuts that would lift corporates’ bottomlines, boosting earnings. Besides, record GST collections and easing inflation suggest strong economic activity that would contribute to better corporate profitability.

Last but not the least IPO activity remained robust in June amid improving sentiment toward riskier assets. Over 20 firms raised more than Rs. 9,000 crore. SMEs dominated the scene, accounting for three-fourths of offers. The pipeline for new listings in July also looks buoyant, with 26 issues expected to hit Dalal Street in the first two weeks.

While uncertainties may persist in the near future, led by geopolitical conflicts and changes in the US tariff regime, easing domestic inflation, the RBI’s steady focus on economic growth and rising liquidity levels would keep market momentum strong. Large-cap equities would be preferred for their reasonable valuations.

Happy Investing!