Domestic Momentum Builds as AI Trade Unwinds

Mumbai, 26th August 2026: PL Asset Management, the asset management arm of PL Capital Group, has released its PMS Monthly Newsletter for July 2026, reporting that India's domestic fundamentals — earnings, credit growth and institutional flows — held firm through the month even as a reignited Iran-linked conflict kept oil prices elevated and tested risk appetite across global markets.

July was shaped by a fraying Iran ceasefire and renewed disruption in the Strait of Hormuz. A May memorandum that had briefly restored tanker traffic collapsed during the month; renewed attacks on vessels and a resumed US blockade pushed transit volumes back toward war-time lows, keeping Brent crude in a wide $80–$120 band it has held since the March strikes. US core inflation, however, came in subdued — July core CPI rose just 0.2% month-on-month and 2.5% year-on-year, matching the slowest annual pace since March 2021 — leading markets to pare bets on near-term Fed action ahead of Fed Chair Kevin Warsh's remarks at the Jackson Hole symposium.

Global equity markets diverged sharply in response. The Hang Seng rose 13.13% in July while the KOSPI fell 22.19%, the Nasdaq 100 declined 6.61% and the Nikkei 225 dropped 8.14% — a broad unwind of the AI- and semiconductor-led trade that had powered several Asian markets earlier in the year. The Nifty 50 gained 2.17% over the same month, closing July at 24,383.60 with the rupee at 95.42 to the dollar, as India's domestic fundamentals held their ground against a volatile external backdrop.

Domestic institutional investors — mutual funds, insurers and pension funds — extended their net buying streak to 37 consecutive months in July, the longest such run in data going back to 2007, continuing to absorb foreign selling through the month. Foreign investors showed the clearest signs yet of returning: financial-services shares drew renewed FII buying that reversed more than $12 billion of prior outflows, alongside a record inflow into index-eligible government securities, with banking stocks recording their strongest fortnightly inflow in over a year.

India also reclaimed its rank as the world's fifth-largest stock market.Beneath the headline numbers, the ownership picture looks healthier still: the number of stocks with foreign holding above 1% has broadened from roughly 900 to 1,300 over four years, even as aggregate foreign ownership declined — consistent with a rotation and broadening of exposure rather than a wholesale retreat, with foreign ownership as a share of the market sitting near a multi-year low.