Indian equities closed Monday’s session with strong gains, largely driven by autos, consumer durables, and real estate, after Prime Minister Narendra Modi announced plans to lower taxes on major categories—a move aimed at cushioning the impact of potential US tariffs and boosting consumption.
The Nifty 50 rose sharply by 1% to end at the 24,874 mark, while the S&P BSE Sensex gained 0.84%, also closing at 81,273. The broader markets outperformed, with the Nifty Midcap 100 and Nifty Smallcap 100 indices each rallying over 1%.
Investor sentiment, which had been cautious amid higher US tariffs and muted June-quarter earnings, appeared to turn positive after Modi’s announcement on cutting consumption taxes on everyday goods. Analysts believe the move could soften the blow of potential US tariffs and revive consumption demand.
Markets also drew strength from expectations of a potential pause on the 25% additional tariffs on India’s exports to the US (though the reciprocal 25% tariff remains), following progress in US-Russia talks, as well as from S&P’s upgrade of India’s sovereign credit rating—the first in 18 years.
On Friday, Modi announced GST reforms, proposing to rationalize slabs into just two (5% and 18%) from the current four—5%, 12%, 18%, and 28%.
The proposal triggered a sharp rally in automobile stocks, with sentiment improving on expectations that the tax rate for automobiles could drop to 18% from the current 28%. Consumer durables also surged on hopes that lower taxes would revive growth in urban India.
The announcement will not be effective until the GST Council, which is chaired by the federal finance minister and has representatives from all states, gives a nod. A meeting is expected by October.
