The Indian stock market benchmarks, the Sensex and the Nifty 50, jumped over a per cent each in early deals on Thursday, September 4, after the GST Council announced a mega Diwali gift for Indian consumers.
The historic GST rate cuts, announced after the 56th GST Council meeting, appear to have rekindled investor risk appetite, as the reforms are expected to boost consumption, lift GDP growth by 100–120 bps, and counter US tariffs on Indian goods.
“GST rate changes, along with RBI’s rate cuts, income tax rebates announced in FY26 budget and easing inflation are all levers for a consumption uptick in the economy. We expect GST-related demand boost to add 100 to 120 bps to the GDP growth over the next 4-6 quarters, thereby nullifying the negative impact of higher tariffs on exports to the US,” said Garima Kapoor, Economist and Executive Vice President, Elara Capital.
GST reforms: a major boost for the Indian economy
The GST reforms could potentially be a game-changer for the Indian economy. They are expected to benefit a wide spectrum of sectors, from FCMG to consumer goods to electronics to automobiles.
“The ultimate beneficiary is the Indian consumer, who will benefit from lower prices. The potential big boost to consumption in an economy that is already in growth momentum will be big and may surprise on the upside,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
“This GST reform, along with the fiscal and monetary stimulus already provided, can trigger a virtuous cycle and boost India’s growth to 6.5 per cent in FY26 and perhaps 7 per cent in FY27 with impressive gains in corporate earnings,” Vijayakumar said.
The GST reforms, which will give a big boost to demand, and may result in improved earnings for a wide range of companies in the automobile, FMCG, and cement sectors in the next quarters.
“Lower taxes on essentials, FMCG products, autos and cement will leave consumers with more money in hand. This should directly boost demand, help traders and businesses see higher volumes, and may even favourably impact next quarter’s earnings. It also carries the potential to ease inflation,” said Shripal Shah, MD and CEO of Kotak Securities.
Shah, however, added that the key will be how quickly companies pass on the benefits to customers. If done well, this move can lift both sentiment and spending, Shah said.
Can GST reforms drive Sensex, Nifty to record high by Diwali 2025?
Some experts believe a renewed market optimism can drive the Sensex and Nifty 50 to fresh highs by this Diwali.
“It is possible that the benchmark indices hit their fresh highs by this Diwali as GST rate cuts are a big consumption boost,” said Pankaj Pandey, the head of research at ICICI Securities.
“The 27,000 mark for Nifty may be difficult as the risk of Trump’s tariffs remains, but a record high near the levels of 26,500 is possible. If Trump’s 25 per cent additional tariffs are removed, then the Nifty 50 may scale the 27,000 mark,” said Pandey.
On September 27 last year, the Sensex and the Nifty 50 hit record highs of 85978 and 26,277, respectively.
Some experts, on the other hand, believe that the Nifty’s march from hereon will depend on many factors, including how the trade negotiations with the US pan out, the movement of foreign institutional investors (FIIs), and earnings recovery.
The actual impact of GST reforms on earnings could start reflecting from the December quarter, but there may be some change in management commentary as early as the September quarter itself.
“The market may hit fresh highs by the end of this year, but it seems unlikely to happen by this Diwali, which is just a month and a half away. After the initial enthusiasm, tariff issues will continue to haunt the market,” said Vijayakumar.
Nifty is still 5 per cent down from its all-time high, considering the intraday high of September 4.
Ajit Mishra, SVP of research at Religare Broking, said the GST is definitely a major positive, but it is difficult to say that the market will hit a record high before Diwali.
“I doubt the market will hit a high by Diwali. GST reforms are definitely positive, but the tariff-related uncertainty is still looming. The market will wait to see how these reforms have impacted the earnings. A big silver lining in the next quarterly result will be a big positive for the market,” said Mishra.
Mishra also believes the market could hit a record high by the end of the year.
“The banking and the IT sectors are underperforming, and these two sectors hold nearly 50 per cent weightage in the index. So, hitting a record high will be difficult. The index may touch the levels near 26,500 by the end of 2025,” said Mishra.
Prashanth Tapse, senior vice president (Research) at Mehta Equities, believes the FII selling spree and Trump’s higher tariffs on India, which are creating growth concerns, will continue to weigh on sentiment.
“It looks difficult that the market will scale a new peak before Diwali. The impact of GST will be visible in the second half of the year. The GST will not have a significant impact on Q2 earnings. The Q3 and Q4 earnings will offer a better picture of the consumer behaviour and GST impact,” said Tapse.
Tapse said today’s upside was a sentimental boost. The market is cheering the government’s decision.
“The undertone has turned positive. GST reforms have cushioned the concerns over US tariffs and geopolitical chaos. The consumption story will remain strong, but a more real impact would be visible in the second half of the current financial year,” said Tapse.
Read all market-related news here
Read more stories by Nishant Kumar
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
