Indian Markets Surge as GST Cuts Propel Pre-Diwali Optimism

Indian equity markets experienced a significant boost on Thursday after the government announced adjustments to Goods and Services Tax (GST) rates. The reform spurred optimism among investors, fueling hopes for a robust pre-Diwali rally as major indices opened on a strong note.

The Nifty 50 index surged 265.70 points, opening at 24,980.75, marking a 1.08% increase. Similarly, the BSE Sensex climbed 882 points, starting the day at 81,450.55 with a gain exceeding 1%. Market experts suggest that conditions are ripe for a bullish trend, with potential further tariff reductions likely to push markets to new highs.

According to Ajay Bagga, a banking and market expert, the Indian market is well-poised for an upcoming rally. Bagga highlighted significant macroeconomic support, including multi-quarter high GDP, strong PMI readings, income tax reductions, government expenditure, and growing rural demand fueled by a bountiful monsoon. The reduction in GST is expected to enhance consumption and contribute to a festive season economic upswing.

On Wednesday, India's Composite PMI reached a 17-year peak, indicating vigorous output growth across sectors. As a result, broader market indices, such as the Nifty 100 and Nifty Midcap 100, also reflected market optimism, each increasing by over 1%.

Sectoral indices recorded significant gains; Nifty Auto stocks jumped over 3% with GST reductions on smaller cars, while the FMCG index rose by 2.66% following tax eliminations on essential goods. The realty sector also saw over a 1% increase, and overall, all major sectors traded positively.

Nilesh Shah, Managing Director of Kotak Mahindra AMC, described GST rationalization as a prudent financial move. Shah commended the government's swift action, advocating continuous processing improvements and addressing tax leaks. Concurrently, most Asian markets reported advances, though Hong Kong's Hang Seng index declined by over 1% at the report time.

(With inputs from agencies.)