Sensex surges 700 points: What is driving today's rally?
What's the story
The Indian stock market is witnessing a major rally today with both the Sensex and Nifty opening significantly higher. The Nifty climbed 200 points to cross the 24,900 mark, while the Sensex surged more than 700 points to move past 81,200. The surge comes after the government announced tax cuts on several goods under a Goods and Services Tax (GST) overhaul. The move is aimed at boosting consumption ahead of the festive season and countering pressure from high US tariffs.
Tax reform
Finance Minister announces massive tax cuts on consumer goods
Finance Minister Nirmala Sitharaman announced massive tax cuts on a range of consumer goods, including soaps and small cars. The new rates, called "GST 2.0," will come into effect from September 22. The revised structure simplifies the four-tier system into two rates of 5% and 18%, while a special 'sin tax' of 40% on tobacco, pan masala, big cars, and other luxury items.
Market response
Market capitalization jumps by ₹1.7 lakh crore
The combined market capitalization of all BSE-listed companies jumped by ₹1.7 lakh crore to ₹454.99 lakh crore. Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, called the tax reform a "revolutionary" move that is likely to boost consumption and corporate earnings across sectors. He said "the ultimate beneficiary is the Indian consumer who will benefit from lower prices," adding that the potential boost in consumption "may surprise on the upside."
Growth forecast
Vijayakumar sees potential for consumption boost to surprise on upside
Vijayakumar also noted that the changes, along with previous fiscal and monetary measures, could create a virtuous cycle pushing growth toward 6.5% in FY26 and possibly even 7% in FY27. He said "stocks in sectors as varied as automobiles, FMCG, white goods, cement, insurance etc." will be the focus of attention of bulls," adding that autos could outperform in the near term due to short covering fueling further upside.