Research note

Avendus Wealth - Market Strategy Equities (Managed Solutions Listed Equities Desk), July 07 2026

Added 9 Jul 2026, 19:44 IST (83d ago) · 8 signals

MIXED
Indian equities
Gold & commodities
Bonds & rates
Global equities

Decision

Claude's read of what this note means — the so-what, not a list of facts. Advisory only; no orders are placed.

Nifty 50 enters next week at 23,866 — above the source-cited dip-entry zone of 23,600 and already pricing in 2H optimism — so the constructive medium-term case (Avendus: 11% 12M upside, 18.3x 1yr-fwd P/E at a slight discount to the 10-year average) is intact, but Q1FY27 earnings risk (Avendus pre-flags a 2–3% FY27 downgrade) and a 4th consecutive month of FII net selling (₹54,000 cr net in June alone) keep near-term asymmetry tilted toward chop rather than a clean large-cap breakout.

Hold existing Bank Nifty / Nifty Monday short strangles without layering new short premium into earnings season — Bank Nifty's +6.1% June rally has decayed the put leg favorably, but the put leg IS the vega pain axis (on any risk-off flush, the short-put absorbs adverse delta AND vol expansion simultaneously; the short-call gets directional relief but vega on both legs inflates), so let theta work and queue a Nifty long futures add exclusively at the source-cited 23,600 level, which Avendus explicitly marks as the next 25%-corpus deploy trigger.

Initiate a 2-month Infosys put spread (top-tier NSE F&O liquidity) to position for continued IT sector weakness — Accenture's fresh revenue-guidance cut is a direct leading indicator for Infosys and TCS order books, and USD/INR at 95 with the rupee strengthening despite a rising DXY compounds the damage (Infosys earns roughly 60% of revenue in USD; an appreciating INR directly compresses those receipts in rupee-reported terms, amplifying the demand-side headwind); apply an IV-percentile below 60 entry gate, spread width capped at 1 ATR of Infosys, abandon the trade if net mid-debit exceeds 35% of spread width, and pair a short USD-INR near-month future on NSE currency F&O if you want to isolate pure IT demand destruction from the FX drag.

If Nifty prints a month-end close below 23,200 — the source's explicit bearish-flip level, with next support at 22,200 — exit the 23,600-entry long futures tranche immediately and take gains on the Infosys put spread; do not average the futures lower or widen put spread strikes below that close.

Do not add new short-strangle premium above Nifty 25,200 (the top of the source-cited 23,000–25,200 broad range), since selling vega near that band buys yield for pennies while leaving the short-put exposed to the full delta-plus-vega double-hit on a Q1 earnings guidance-miss selloff.

Signals (8)

Single claims extracted from the note. The number is each claim's conviction delta, from −5 (strongly bearish) to +5 (strongly bullish).

−2.0

Brent crude -20.8% in June to $73/bbl as US-Iran MoU signed; Middle East risk premium fully unwound

Gold & commodities · high confidence · strength 8/10
−2.0

NSE Smallcap 32% above 10-yr P/E avg, Midcap 15% premium — Avendus flags near-term consolidation risk

Indian equities · medium confidence · strength 7/10
−2.0

Nifty IT -9.6% June, -32.5% YoY — worst sector; Accenture guidance cut flags weak global IT demand cycle

Indian equities · medium confidence · strength 7/10
+2.0

Govt removes withholding tax on FPI G-Sec gains; RBI at 5.25% neutral — GOI 10Y at 6.75% attractive vs equities

Bonds & rates · medium confidence · strength 7/10
+2.0

Nifty 50 large-caps set to lead next rally leg; 11% 12M return potential, buy-on-dips 23,000–23,600

Indian equities · medium confidence · strength 7/10
−2.0

Gold -11.7% in June to $4,008/oz as safe-haven demand unwinds; still +21.3% YoY but near-term headwind

Gold & commodities · high confidence · strength 7/10
−1.0

DJIA 1Y fwd P/E at 20.8x nearing +2SD; S&P 500 at 20.2x — US equity valuations leave thin margin of safety

Global equities · medium confidence · strength 6/10
+1.0

FII net -₹54K cr in June (4-month sell streak); FPI at 14-yr ownership low limits further outflow pressure

Indian equities · medium confidence · strength 6/10

Source text

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Avendus Wealth — Market Strategy Equities | Managed Solutions (Listed Equities) Desk | July 07, 2026 HEADLINE VIEW: Large-caps to start participating in the rally now. Strong recovery led by domestic liquidity; earnings recovery and policy support keep medium-term outlook constructive. MARKET METRICS (as of June 30, 2026): - Nifty 23,866: +1.4% 1M, +6.9% 3M, -6.5% 1Y - Nifty Junior 71,629: +0.8% 1M, +18.7% 3M, +3.8% 1Y - Nifty Midcap 61,798: +0.1% 1M, +17.4% 3M, +3.4% 1Y - Nifty Smallcap 18,863: +4.0% 1M, +24.1% 3M, -1.1% 1Y - BSE 500 35,959: +1.5% 1M, +11.7% 3M, -2.9% 1Y - Sensex 76,479: +2.3% 1M, +6.3% 3M, -8.5% 1Y - Dow Jones 52,319: +2.5% 1M, +18.7% 1Y - S&P 500 7,499: -1.1% 1M, +20.9% 1Y - MSCI EM 1,723: -1.7% 1M, +40.9% 1Y - MSCI EM Asia 987: -1.4% 1M, +46.7% 1Y - Dollar Index (DXY) 101: +2.3% 1M - USD/INR 95: rupee appreciating despite rising DXY - Gold $4,008/oz: -11.7% 1M, -14.3% 3M, +21.3% 1Y STRATEGY / OUTLOOK: - 12-month potential returns: Nifty-50 = 11%, BSE-500 = 12% (assuming 12mth fwd P/E settles at 10-year average multiples) - Nifty-50 technical: Buy on dips within a broad range of 23,000-25,200. A month-end close below 23,200 = bearish bias. Next support below 23,000 is 22,200. - Deployment (top-down): 65% of target corpus deployed around May-26 closing levels. Deploy 25% more if Nifty slips to ~23,600. - Cues for market sentiment: (1) Earnings impact commentary related to the war, (2) FII flows, (3) Macro data — dollar strength, war impact on crude oil and commodity prices. MARKETS IN JUNE 2026 — WHAT HAPPENED: - Global equities recovered sharply during Q1FY27 after the brief Iran-Israel conflict was contained and crude oil retraced from its spike. - June: Nasdaq flat, S&P 500 and MSCI EM Asia both -1% in USD terms. - Crude-sensitive Indian markets outperformed: Nifty 50 / BSE 500 +1.7% / +1.9% in USD terms. NSE mid and small cap +0.5% / +4.4% in USD terms. - FIIs remained net sellers in June: -INR 54,000 crores. Over last four months, FIIs have been net sellers every month — longest consecutive selling streak since June 2022. - Robust SIP flows and retail buying gave some respite to the outflows. - FPI ownership in Indian equities remains near a 14-year low, leaving little room for further outflows given expected earnings momentum strengthening. KEY EVENTS IN JUNE: 1. Government announced reforms to attract long-term foreign capital, including REMOVAL OF WITHHOLDING TAX on interest and capital gains tax on FPI G-Sec investment. 2. RBI MPC unanimously retained policy repo rate at 5.25%, maintained stance at "neutral", announced measures to incentivise foreign capital inflow. 3. US and Iran signed an MoU to end the war, but fresh attacks in the Middle East revived fears of a renewed escalation in the US-Iran conflict. 4. Accenture trimmed its revenue growth guidance and flagged weak demand visibility — raising concerns about global IT spending. OUTLOOK 2H 2026: - Middle East conflict, elevated crude oil prices, persistent FPI outflows, rupee weakness and weak earnings kept the market under pressure in 1H. - Second half expected to be better as most macroeconomic concerns are easing and the worst of FPI selling appears behind us. - Sectors backed by strong earnings visibility and structural growth (rather than short-term market momentum) expected to outperform. - LARGE-CAPS, which underperformed over the last 6 months, expected to now participate in the rally going forward. - Mid and smallcap stocks may see some consolidation while large-caps outperform. KEY MONITORABLES FOR COMING MONTHS: 1. Monsoon progression and El Niño development. 2. 1QFY27 earnings and management commentary. 3. US-Iran peace deal. 4. Cool-off of the AI trade globally. EARNINGS: - FY26-28e consensus earnings CAGR for Nifty-50 / BSE-500 = 16.5%. - Bloomberg consensus growth forecast: Nifty-50 / BSE-500 = 17% / 15% for FY27 and 16% / 18% for FY28. - Avendus view: FY27 earnings may get downgraded by 2-3% over the coming months. VALUATIONS: - Nifty 1yr-fwd P/E at 18.3x (slight discount to 10-year average). - NSE-Midcap 1yr-fwd P/E at 27.6x — trading at 15% premium to 10-year average — may cause consolidation. - NSE-Smallcap 1yr-fwd P/E at 23x — trading at 32% premium to 10-year average — may cause consolidation. - BSE 500 1yr-fwd P/E at 20.4x (close to 10-year average). BSE 500 P/B at 2.9x (close to 10-year average). - S&P 500 1yr fwd P/E at 20.2x (between +1SD level and 10-year average). - DJIA 1yr fwd P/E at 20.8x (nearing +2SD level of 10-year average). - MSCI EM 1yr-fwd P/E at 11.3x (still below 10-year average). - Yield Gap (BEER ratio): in NEUTRAL zone despite sharp equity rally. - 10-year GOI bond yield at 6.75%. Debt still relatively attractive vs equities near-term. SECTOR PREFERENCES: - Favourable risk-reward balance: CONSUMER DISCRETIONARY, BANKS, IT. - Selective plays: Auto, NBFC, Power, Chemicals, Textiles, Telecom, Pharma. - Potential tactical plays: Media, Metals, Healthcare. - On the sidelines: Infra, Insurance, Realty (growth uncertainty); Capital Goods, Defense, New Age Tech, OMCs (scope of earnings deceleration). NSE SECTOR PERFORMANCE (June 2026): - Best 1M: Nifty Bank +6.1%, Nifty Private Bank +6.1%, Nifty Realty +6.0%, Nifty Media +5.0%, Financial Services +4.7%, PSU Bank +4.1%, Pharma +4.0%. - Worst 1M: Nifty IT -9.6% (worst sector), Metal -6.9%, FMCG -1.2%. - Best 3M: Realty +24.7%, Pharma +15.1%, Media +13.0%, Private Bank +13.7%, Bank +11.8%, Financial Services +10.7%. - 1Y winners: Metal +31.3%, PSU Bank +17.9%, Pharma +14.9%, Auto +10.9%. - 1Y losers: IT -32.5%, Media -15.7%, Realty -15.9%, FMCG -11.1%. THEMATIC: - Nifty CPSE was the WORST performer -6.7% in June. - Nifty MNC was the ONLY thematic sector in the green +0.86%. - Nifty PSE -4.63%, Services -2.58%, Consumption -2.25%, Infrastructure -1.49%. KEY SECTOR VALUATIONS: - IT P/E: FY26 17.8, FY27e 15.2, FY28e 14.1 — implied EPS growth FY27e +17%, FY28e +7%. - Banks P/B: FY26 1.7, FY27e 1.8, FY28e 1.6 — growth +7% / +19%. - Auto P/E: FY26 33.4, FY27e 24.6, FY28e 20.4 — growth +36% / +21%. - Metals P/B: FY26 2.8, FY27e 2.2 — implied growth +87% FY27. - Oil & Gas P/E: FY26 7.8, FY27e 11.2 — implied earnings -30% FY27. - Pharma P/E: FY26 38.5, FY27e 33.8 — growth +14%. COMMODITIES: - Brent Crude $73/bbl: -20.8% 1M, -33.1% 3M (Middle East tension eased). +7.9% 1Y. - Gold $4,008/oz: -11.7% 1M, +21.3% 1Y (+72.3% 2Y). - Aluminium $3,070/ton: -18.5% 1M. - Copper $13,349/ton: -1.8% 1M, +32.8% 1Y. - Coking Coal $243/ton: +1.8% 1M, +36.4% 1Y. - Steel $489/ton: -3.0% 1M, +9.4% 1Y. FLOWS: - Monthly DII flows sharply positive, absorbing FII selling. - FII net -INR 54,000 crores in June; 4th consecutive month of net FII selling. MSCI EM WEIGHTS (India trend): - India's MSCI EM weight continues declining trend. - Current (Jun-26): India 19%, Korea 23%, Taiwan 28%, China 19%, Other 11%. - India was 25% in Jun-24 vs 19% now. JULY 2026 EVENTS CALENDAR (India): - 15 Jul: Unemployment Rate - 17 Jul: Foreign Exchange Reserves - 24 Jul: HSBC India PMI Manufacturing + Bloomberg India Economic Survey - 31 Jul: Fiscal Deficit YTD + Bank Credit YoY