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After two months of muted movement due to tariff tensions, the stock markets are poised to break a 500-600-point range decisively on either side, according to marketwide futures rollover data after the expiry of Thursday's monthly derivatives.

Since the end of June, the Nifty 50 index has received strong support at 24,400-24,500 levels and faced resistance at about 25,000, according to exchange data.

On top of investors' minds is the impact of higher US tariffs on India's GDP, which surprised on the upside by growing at 7.8% in the June quarter compared with market expectations of a 6.5-7% expansion, primarily due to low inflation.

The rupee, though, plumbed to a record low of 88.21, down 58 paise from a day earlier, while bond yields rose by 3 basis points to 6.56% on concerns over the impact of the tariffs and the possibility that strong economic growth may limit the ability of the Reserve Bank of India to cut interest rates.

The RBI has reduced the key repo rate by 100 basis points this year to 5.5% and analysts expect the central bank to cut it by another 25-50 bps during the rest of the fiscal year to combat the impact of tariffs on the economy.

"Though the GDP print was higher than the Street’s expectations, the impact of punitive tariffs overshadows all other good news, which is why the currency also weakened, and bond yields rose," said Jayesh Mehta, CEO and executive vice chairman of DSP Finance.

The Nifty 50 index fell 0.3% to 24,426.85 and the BSE Sensex lost 0.34% to 79,809.65 on Friday, a day after the expiry of the August series of derivatives. Derivative contracts expire on the last Thursday of the month, and this will change to Tuesday from next week.

The rollovers indicate higher carry-forward positions in the futures contracts of the Nifty, the Bank Nifty and stocks than the three-month average, implying a belief among participants that the markets are likely to break down or out of the two-month range, which is why the bulls have built higher longs and the bears greater shorts.

A futures contract facilitates the sale or purchase of an underlying asset at a fixed price at a future date. Such contracts are used to hedge one's stock portfolio or to speculate. Rollovers refer to the carrying forward of such positions.

Marketwide rollovers stood at 92% on Thursday compared with the three-month average of 90%, according to IIFL Capital Services. Nifty rollovers stood at 84% against the three-month average of 78%, Bank Nifty at 81% (78%) and stock futures at 94% (92%).

Rollover costs (the price paid to roll over a long or short position) dipped in the expiry week from 58 basis points (a basis point is one-hundredth of a percentage point) to 45 bps, "mirroring weak sentiment," IIFL Capital said.

Since the market is at the lower end of the 24,400-25,000-trading range, one can do a long straddle, according to IIFL, as the market could move decisively either way, given the higher rollovers. A long straddle involves buying a call and put option of the same strike with an investor being agnostic on market direction.

"As the rollovers are higher than the average, we could see a decisive move out of a 24,400/500-25,000 range the market has been stuck in for a few months," said Kruti Shah, a quant analyst at Equirus.

Exchange data shows that the Nifty recovered from a multi-month low of 21,743.65 on 7 April, the day US President Donald Trump announced reciprocal tariffs, to an intraday high of 25,669.35 on 30 June. Since then, it has slumped to Friday's close of 24,426.85. The recent weakness emerged after an additional tariff of 25% for India’s oil purchases from Russia took effect on Wednesday, which was a holiday for Ganesh Chaturthi.

Analysts said the trading range could be broken in the coming sessions as US tariffs take effect and factors such as the rationalisation of goods and services tax rates for most goods spurs demand for two-wheelers, small cars and white goods. The GST revamp is set to coincide with the festive shopping season.

"There is a slowdown in the economy, and I think this is a year of accumulation in a consolidating market," said Swarup Mohanty, vice chairman & CEO of Mirae Asset Investment Managers.

The fallout from tariff tensions has resulted in foreign portfolio investors selling shares worth ₹1.7 trillion year to date in the secondary market, per NSDL. Domestic institutional investors purchased shares worth ₹5 trillion, enabling the market to recover after 7 April, according to exchange data.

However, incessant FPI shorting in cash and derivatives – their long-short ratio in the Nifty and Bank Nifty futures stood at 8.2% on Thursday – means a capped upside at about the 25,000 level.

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