Welcome to the July F&O series. After closing the June series with a strong gain of over 715 points, the market stands at a fascinating juncture. Nifty is just 3% away from its all-time high, and as we step into this new series, the data presents a classic battle between historical bullishness and the potential for mean reversion.
Let’s break down the key data points to build our outlook for July.
1. The Strong Seasonal Tail-Wind for July
Historically, July has been a very favourable month for the bulls. The data is compelling:
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Positive Track Record: In the last 10 years, the July series has ended positive 8 times.
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Recent Performance: The last few July series have shown consistent gains:
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Jul 2022: +1149 Pts (+7.3%)
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Jul 2023: +688 Pts (+3.6%)
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Jul 2024: +362 Pts (+1.5%)
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This strong seasonality provides a powerful bullish backdrop and suggests that, historically, buying into the July series has been a high-probability trade.
2. The Big Caveat: Is the Market Overstretched?
While history favours the bulls in July, the market’s recent performance warrants caution.
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The Four-Month Rally: Nifty has now rallied for four consecutive series, starting from March 2025.
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Jun 25: +715 Pts
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May 25: +587 Pts
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Apr 25: +655 Pts
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Mar 25: +1047 Pts
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A Historical Cap: This is the most critical counter-statistic. Nifty hasn’t managed to gain for more than four consecutive series since way back in May 2017. This suggests that the market is statistically due for a pause, consolidation, or a corrective dip.
This sets up the primary conflict for the month: Will the strong July seasonality overpower the market’s extended rally?
3. Derivatives Data: The Conviction Looks Strong
To find clues, we turn to the derivatives data, which reflects the conviction of market participants.
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Strong Rollovers: Jun-Jul rollovers stand at 79.5%. This is higher than both the previous month (79.1%) and the 3-month average (78.1%). Higher-than-average rollovers indicate that traders, primarily the bulls, have carried their positions into the new series with strong conviction. Rollover Price is at 25310
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Higher Starting Open Interest (OI): The July series begins with a healthy OI of 1.48 Cr shares, significantly higher than the start of June (1.26 Cr) and May (1.15 Cr). This indicates increased participation and fresh interest right at the start of the month.
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The FII Pivot: This is perhaps the most bullish signal in the data. FII long exposure in Index Futures has jumped to 38% for the start of July. This is a dramatic increase from the 20% they held at the start of June, signaling a major shift from a cautious/bearish stance to a moderately bullish one. (For context, retail/client long exposure is at 53%).
4. Key Triggers to Watch in July
The direction for the month will be dictated by several key events:
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Q1FY26 Earnings Season: The start of the results season will be the most significant domestic trigger.
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Global Cues: Geopolitical developments and any news on tariffs will influence market sentiment.
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FII Flows: The most critical factor. Will the turnaround in their derivatives positioning be matched by sustained buying in the cash market?
Conclusion & Market Outlook
The stage is set for an intriguing July. We have strong seasonal tailwinds and supportive derivatives data (high rollovers, high OI, and a jump in FII long exposure) making a case for the bulls.
However, this is countered by the fact that the market is historically overstretched after a 4-month rally.
The Verdict: The derivatives data currently holds more weight, suggesting that the path of least resistance remains upward. The significant shift in FII positioning is a powerful vote of confidence. However, traders should be prepared for potential volatility and consolidation. A decisive move above the recent highs could trigger a fresh leg of the rally, while a failure to do so could see the market take a well-deserved breather.
Watch the FII flows and the early reactions to Q1 results closely.
Trade safe.