India’s benchmark equity index, the Nifty 50 (.NSEI), surged past the 25,000 mark in early trade on Monday, August 18, before paring some gains to settle at a 1.07% increase. The rally, driven by optimism around proposed GST reforms and a sovereign credit rating upgrade, reflects growing investor confidence in India’s macroeconomic trajectory.
The index touched an intraday high of 24,953.50, buoyed by strong performances in auto, consumer discretionary, and financial stocks. Although some profit booking later in the session trimmed gains, the Nifty 50 still closed significantly higher, signaling bullish sentiment across the board.
Policy Tailwinds Fuel Market Optimism
The rally was largely attributed to Prime Minister Narendra Modi’s announcement of sweeping reforms to India’s Goods and Services Tax (GST) regime. In his Independence Day speech on August 15, Modi revealed that the Centre had circulated a draft proposal to states aimed at simplifying the GST structure by Diwali.
The proposed changes include scrapping the 12% and 28% slabs and shifting most goods and services to the 5% and 18% categories. High-tax items like automobiles and cement could benefit from this move, potentially boosting consumer demand and corporate margins.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “Declarations by the Prime Minister on the next major reforms in GST by Diwali are a big positive. These changes could significantly reduce the cost of essential goods and improve profitability across sectors.”
Credit Rating Upgrade Adds Momentum
Adding to the bullish mood, S&P Global upgraded India’s long-term sovereign credit rating from ‘BBB-’ to ‘BBB’—its first upgrade in 18 years. The short-term rating was also raised from ‘A-3’ to ‘A-2’, reflecting confidence in India’s fiscal discipline and economic resilience.
This upgrade is expected to attract more foreign institutional investment (FII), which has been relatively subdued in recent months. Analysts believe the improved rating will lower borrowing costs and enhance India’s appeal among global investors.
Sectoral Highlights: Autos, Cement, and Financials Lead
Among the top gainers on the Nifty 50 were Maruti Suzuki, Mahindra & Mahindra, Bajaj Finance, UltraTech Cement, and Bajaj Finserv. These stocks rallied on expectations that GST reforms would reduce input costs and stimulate demand.
TVS Motor Company hit a 52-week high of ₹3,173.90, while Interglobe Aviation and Hyundai Motor India also reached record levels. Insurance firms like ICICI Prudential and SBI Cards saw gains of over 2%, anticipating benefits from the revised tax structure.
However, not all sectors participated in the rally. IT majors like Infosys and HCL Technologies, along with FMCG giant ITC, were among the laggards, reflecting sector-specific headwinds and valuation concerns.
Global Cues and Market Outlook
Asian markets traded mixed, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng posting gains, while South Korea’s Kospi declined. U.S. markets ended mostly lower on Friday, but hopes of rate cuts by the Federal Reserve continue to support global risk appetite.
Back home, analysts remain cautiously optimistic. According to Choice Broking, the Nifty is hovering near its short-term support of 24,590 and faces resistance at 24,800. A breakout above this level could trigger momentum buying toward 25,000+, while a dip below 24,300 may invite fresh selling pressure.
The broader setup remains “cautiously bullish,” with traders advised to adopt a tactical “buy-on-dips, sell-on-rise” strategy.
What’s Next?
With GST reforms on the horizon and a credit rating upgrade in the bag, India’s equity markets appear poised for further upside. However, global uncertainties, sectoral rotation, and valuation pressures could temper gains in the short term.
Investors will be watching for clarity on the GST rollout timeline, corporate earnings, and macro data to gauge the sustainability of this rally.
Sources: MSN, The Hindu, Moneycontrol, Financial Express
