How Did the Indian Stock Market Fare Amid GST Reforms?

Mumbai, Sep 6 (NationPress) The Indian stock market closed the week with slight gains as initial enthusiasm surrounding GST reform began to manifest, despite the resurgence of global trade concerns.

Both benchmark indices, Nifty and Sensex, ended the week approximately 0.85 percent higher, with attention shifting to mid- and small-cap stocks.

The Nifty IT sector saw a decline of over 2.5 percent this week due to worries about diminished discretionary spending amid economic uncertainty, high interest rates, and geopolitical risks. In contrast, the Nifty Metal and Auto indices recorded gains of around 1 percent each, while Realty and FMCG sectors dropped by up to 1.5 percent due to profit-taking.

According to Vinod Nair, Head of Research at Geojit Investments Limited, "Unlike the IT sector, consumer-oriented sectors such as auto and FMCG progressed positively, bolstered by expectations that GST reductions will enhance domestic consumption and aid in demand recovery."

Positive macroeconomic indicators, prospects of an interest rate cut by the U.S. Federal Reserve, and favorable global signals provided some support for domestic equities. However, global bond markets added a note of caution, with yields on German and French 30-year bonds reaching decade highs due to mounting debt and fiscal issues in the Eurozone.

Prominent auto companies such as Eicher Motors and M&M surged by 2 percent each to achieve record highs after the GST on vehicles was lowered from 28 percent to 18 percent. In the metal sector, GMDC soared 11 percent to Rs 509, while National Aluminium and NMDC increased by up to 2 percent.

Analysts predict that sentiment will remain mixed as GST relief, resilient consumption, and government spending will benefit sectors tied to domestic growth, while ongoing global trade negotiations may temper risk appetite.

Nair commented, "A multi-asset investment strategy is likely to gain traction in this environment. Traders are eyeing the U.S. jobs report, a macroeconomic trigger that could affect Fed rate cuts. Key indicators including U.S. nonfarm payrolls, unemployment rates, inflation, and the ECB's rate decision will also influence investors this week."

On a weekly basis, the Nifty has consolidated within a broader range, forming an inside bar pattern. Support levels are identified at 24650 and 24500, but it must maintain above 24700 to advance towards 24850 and eventually 25000, according to analysts at Motilal Oswal.

In domestic markets, continuous foreign outflows have put pressure on the rupee, which has fallen to a record low against the U.S. dollar. Meanwhile, heightened safe-haven demand has driven gold prices to unprecedented levels.

The GST rationalization is anticipated to enhance consumption, streamline the tax system, alleviate compliance burdens, and improve voluntary compliance, thereby enlarging the tax base.

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