The start of the new week is likely to see a positive start for domestic markets. Thanks to positive global cues, Gift Nifty is ruling at 24,600 (730 am) against Nifty futures close of 24,521, signalling a gain of about 80 points for the Nifty. So far, the result season has began on positive start. However, analysts said that the focus is now on the upcoming Budget.

Krishna Appala, Sr. Research Analyst, Capitalmind Research, said: “Nifty awaits the Budget spotlight. The market commenced the Q1FY25 earnings season on a positive note, with TCS reporting robust figures: a 5.4% YoY revenue growth and an 8.7% profit growth. These results have provided a much-needed boost to the IT sector, where sentiment has been sluggish, and valuations appear reasonable” 

PSUs are currently leading the market, particularly those in the Railways, Defence, Shipbuilding, Power Financing, and Industrial sectors, he said. The upcoming Budget session on July 23, is anticipated to deliver further incentives, including investments and capital expenditure, for these sectors. On the global stage, the US core CPI inflation for June stood at 3 per cent, with consumer prices experiencing their first decline in four years as inflation eases. This data suggests that the Federal Reserve might implement one or two rate cuts by the end of the year.

“As the Budget session approaches, the market is optimistic that the government will maintain its focus on infrastructure, defence, railways, and green energy. As of now, the market is not factoring in any negative surprises in the form of income tax changes, LTCG, STCG, STT, etc. Any changes in these areas will have a short-term negative impact on the market,” Appala further said.

Meanwhile, the return of foreign portfolio investors as buyers has further buoyed sentiment.

Manoj Purohit, Partner and leader - FS Tax, Tax and Regulatory Services, BDO India, said:  “Net FPI inflows have turned green this month, both in the equity and debt segment. A lot of traction is being seen, primarily in the debt segment by European countries, especially Luxembourg, which surpassed Mauritius to become one of the desired jurisdictions for injecting funds via the FPI route. Ireland, too, follows the suite in light of its conducive local fund regime and tax efficient structures for the debt segment.

“The reason for a quick rebound in the capital markets can be attributed to positive sentiments, a stable government’s assurance on continuity of reforms, tepid US Fed rates and strong domestic demand. The recent announcements in IFSC Gift City for wide participation for foreign and Indian investors has also diverted international players to allocate a substantial portion of their global portfolio to India markets,” he said

All eyes are on the much awaited Budget proposals to be tabled on July 23, which will hopefully announce pathbreaking reforms providing India a golden opportunity against the other emerging global markets. As India enters Amritkaal, the FPI community will play a major role in positioning the country as the third largest economy, he said.

Meanwhile, analysts also welcomed positive IIP and anticipated CPI numbers. 

Vivek Rathi, National Director Research, Knight Frank India, said: “Consumer headline inflation has risen for the first time since December 2023 to 5.08% on the back of higher food prices. Barring the food basket, inflation is indicating signs of bottoming out broadly across the non-food categories, also seen in inflation in the core categories averaging at 3.5% in the last six months. A stable monsoon will play an important role in stabilising food prices and inflation levels over the next few months.

While the revival in industrial production to 5.9% led by increased output generation in electricity and construction goods is indicative of growing economic activities, growth in manufacturing output has been tepid, and is essential to expand further for long-term sustainable growth, he added.