Equities Lose Ground as Early Gains Fade

U.S. stocks closed lower on July 31, with the S&P 500 down 0.37% and Nasdaq off 0.55%, as early optimism from Big Tech earnings faded amid late session volatility and cautious investor positioning.

Strong earnings from Microsoft and Meta initially boosted sentiment and futures, but this enthusiasm was not broad-based. Other tech and semiconductor names, including Nvidia, faced profit-taking, undercutting sustained momentum in the indices.

A sharp drop in health care shares followed White House demands for lower prescription drug prices, while semiconductors slumped after mixed results and outlooks. This weighed on both the S&P 500 and Nasdaq, contributing to the down session.

Amazon beat analyst expectations for the second quarter. However, it gave weak profit guidance, sending the company's shares tumbling 7% in after-hours trading Thursday.

The Federal Reserve held rates steady, but Chair Powell's hawkish commentary kept hopes for near-term cuts in check.

June PCE inflation data showed persistent pricing pressures, partly due to tariff-driven import costs, reinforcing Fed reluctance to ease soon. This added to investor wariness and helped drive the late pullback in equities.

Most markets across the Asia-Pacific region are trading lower on Thursday.

Back home, after a two-session pullback, the Nifty resumed its downward trajectory yesterday, primarily on the back of US President Trump's announcement of a 25% tariff on India and ended the day with a loss of 86 points (0.35%) at 24,768. The broader market felt the pinch as well. Both the Nifty Midcap 100 and Smallcap 100 indices underperformed the Benchmark Indices, each losing 1%. Trump’s new tariffs are impacting the Indian market outlook in the short term.

The Indian Rupee's woes continued, extending its falling spree by depreciating another 17 paise against the greenback to close at 87.59. This marks a near six-month low for the Indian Rupee, its weakest level since February 7th, 2025.

Out of Nifty pack, ITC is going to declare its quarterly results today while from F&O stocks, eight companies are going to declare their Q1 earnings.

Nifty broke the four series winning streak by falling 3.06% in the July derivative series. Bank Nifty too snapped its four series winning streak as it corrected 2.18% in the July series.

FIIs positioning In the Index Futures Segment – Higher Possibility of a Short Covering by Them

FIIs' long-to-short ratio in index futures at the beginning of the August series stood at extremely oversold level of 0.11, as against 0.61 in the last series. This is the lowest since 29 March 2023 (beginning of April 23 series). In other words, out of total positions of FIIS’ in the Index Futures segment, 90% is on the short side.

There are four instances (After March 2020) where FIIS long to short ratio at the beginning of the series stood at or below 0.15 (30-May-2024, 26-Oct-23, 29-March-2023 and 29-Sept-2022). If we were to see performance of Nifty in the subsequent series, Nifty had moved up in all the four series and average gain of Nifty was over 7%. Therefore, considering the historical evidence, there are higher possibilities of a short covering by FIIS in the Index Futures segment in the days to come.

Indian markets are poised to open lower in line with negative global cues.

Recent swing lows of 24598 and 24473 will continue to serve as immediate support. On the upside, the 50-day EMA, positioned near 24930, is expected to remain a strong hurdle for the Nifty.