Front Wave Research said historical patterns, stronger consumer sentiment, easier financing, and steady employment could support domestic consumption stocks into the festive period.
Indian equities may be approaching a seasonal support phase between July and October, with the potential for a festive-season rally running into Diwali.
Seasonal Trends
SEBI-registered analyst Front Wave Research said its base case is that Nifty tends to stabilise in this period, supported by improving consumer sentiment, rising credit offtake, declining unemployment, and tax refunds or relief coinciding with the shopping cycle.
Front Wave Research said this backdrop raises the probability of a tradable bottom forming in late summer, especially for domestic consumption plays such as durables, electronics, jewellery, two-wheelers, entry passenger vehicles, and home electricals.
The research firm noted that in most normal years, July lows often give way to a rally into Diwali, aided by festive buying, promotional pushes by companies, fatter wallets from bonuses and tax refunds, easier credit flows, and a turn in sentiment to risk-on.
Front Wave cited its analysis of the Nifty 50’s monthly return heatmap from 2009 to 2024, which showed mixed outcomes in the August–October period.
While the “Diwali effect” is a tendency and not a certainty, the firm said seasonal buying patterns often align with stronger sell-through and restocking activity, lifting operating leverage for companies in consumer electricals, durables, electronics, jewellery, and entry-level autos.
Festive Demand Boost For Consumer Stocks
The firm added that household sentiment is currently in an upswing, with more consumers seeing it as a good time to buy, particularly in durables and electronics.
During August–October, purchases tend to bunch around auspicious dates, with brands offering EMIs, cashbacks, and exchange offers.
Rising buying intent is typically the first step in the consumption chain, preceding visible pickup in sales and inventory restocking.
Credit is expected to be a major enabler, with lenders signalling an uptick now and forecasting a further rise into the festive quarter.
For brands, this could mean steadier volumes, less need for discounting, and an opportunity to sell higher-margin products.
Market Risks
Front Wave Research said it is monitoring retailer pre-bookings, weekly store conversions, card and POS transaction trends, staffing data, and channel commentary.
It cautioned that a crude oil spike, higher global yields, or a regulatory credit squeeze could offset seasonal tailwinds.
The firm concluded that India’s biggest shopping season is aligning with a more confident consumer, easier financing, steady employment, and fresh cash inflows.
It maintained a ‘Neutral’ stance, saying seasonality and fundamentals suggest a festive-season floor, but it will only increase exposure when its technical dashboard upgrades the Nifty to Neutral or better.
What Is The Retail Mood?
On Stocktwits, retail sentiment for NIfty50 was ‘extremely bullish’ amid ‘high’ message volume.
Nifty50 has risen 2.9% so far in 2025.
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