Indian stocks rally on GST revamp but challenges loom ahead
What's the story
The Indian stock market has opened the week on a positive note, with the Nifty 50 and Sensex rising up to 250 points today. However, analysts are now questioning whether this uptrend can be sustained. Some experts believe that global factors will play a bigger role in determining market trends in the near term, despite the optimism surrounding these tax reforms.
Market response
Nifty50's pullback suggests waning momentum
The Nifty 50 index's pullback after a strong start last week, following the GST cut announcement, suggests that the initial excitement may be waning. Despite a strong start to the week with over 1% gains, the index ended lower on Friday. At the time of writing, Nifty had pared its intraday gains to trade at 24,771.
Tax impact
GST reforms to be implemented this month
Amid heightened India-US tensions last week, the recent GST reforms were a major positive for market sentiment. The GST Council announced tax cuts on most essential goods as part of a government plan to boost consumer spending. Starting September 22, there will be two tax slabs of 5% and 18%, replacing the current four slabs of 5%, 12%, 18% and 28%. Some items like luxury cars and tobacco products will be taxed at 40%.
Expert opinion
Rising domestic borrowings remain a concern
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund, welcomed the GST cut but said it isn't a game-changer amid rising domestic borrowings. He believes this move could boost festive sentiment as lower prices in categories like white goods and cars can spur demand. He also noted that everyday essentials would see an impact with a lag, likely in Q4.
Future hurdles
FIIs continue their selling spree
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd., believes the Indian stock market still faces two challenges: sustained selling by Foreign Institutional Investors (FIIs) and uncertainty over US President Donald Trump's next move. FIIs continued their selling spree in early September, offloading ₹5,666 crore in the cash market. This takes their total outflows for 2025 to ₹1.76 lakh crore after a divestment of ₹1.21 lakh crore in 2024.