Dalal Street Outlook July 2025: Weaker Dollar, Easing Oil Prices May Fuel 8–10% Nifty Upside: Elara Securities

Analysts at Elara Securities suggest that July might have started quietly for Dalal Street investors, but global signals indicate a potential 8-10% upside. A softer US dollar and easing crude prices are expected to support Indian equities shortly. In 2025, Nifty has returned 7.5%, which is below the median returns of 15% seen in previous cycles of a falling Dollar index.

Dalal Street July Outlook: Dollar Weakness and Stock Market Performance

The US dollar index has dropped by 10% in 2025, marking its worst first-half performance since 1973. This decline reflects investor uncertainty due to tariff tensions and policy inconsistencies from Trump. Additionally, the growing US debt has compounded these issues. Historical data shows that a weak DXY paired with a negative Nifty correlation led to positive Nifty returns in years like 2003, 2004 and others.

Elara Capital's analysis reveals that when the DXY weakens alongside strong domestic fundamentals, India's equities tend to outperform significantly. This is evident in 2025 as India's internal growth drivers are active, and global risk appetite is supportive once more.

Easing Oil Prices

Crude prices have fallen back to pre-war levels due to reduced tensions between Israel and Iran, with Brent futures trading below $70 per barrel. "The current conjunction of a falling dollar index and moderating crude oil prices is a perfect milieu for emerging markets (EM) economies, especially India," Elara Securities noted.

Over the past 25 years, during periods when the dollar index was below 100, India's equities outperformed other asset classes like Nasdaq and gold.

Emerging markets (EMs), including India, have better prospects than developed markets (DM). Easier financial conditions from a softer US dollar and stable inflation allow EM central banks to cut rates. "With FII shareholding near lows since September 2017 and macro conditions resembling previous recovery cycles-rate cuts, benign inflation, and external stability-the environment remains supportive for Indian equities," Elara Capital stated.

Midcaps Outperforming

The mid and small caps have historically outperformed the benchmark during times of increased investor risk appetite. "Historically, the broader market also has outperformed in these conditions - midcaps and smallcaps delivered median returns of 22 per cent and 21 per cent, respectively, during comparable periods," said Elara Securities.

In light of the current market scenario, Elara Securities is optimistic about large-cap and mid-cap stocks but remains cautious about small-caps. They identified REC, Power Finance Corporation, Trent, and DLF as having strong risk-reward potential in the large-cap space. For midcaps, HUDCO, Godrej Properties, Oberoi Realty, Prestige Estates, and Indian Hotels offer consistent bull beta exposure with earnings visibility.

The report highlights that if the dollar stays soft without any euphoric rerating, an additional upside of 8-10% from current levels seems well-supported. Notably, there is a negative correlation of 0.9% between the DXY and Nifty50.

Overall, analysts believe that with favourable global cues such as a weaker dollar index combined with easing crude oil prices create an ideal environment for emerging markets like India to thrive economically.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.