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The recent meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping and the tax cut from the government has given a new life in the Indian stock market. Experts believe that these incidents can improve the weak position of the Indian stock market, which seemed to be lagging behind in the rest of the markets in the last few months.
Modi and Jinping met on 31 August in Tianjin city of China. During this time, the two leaders discussed promoting mutual cooperation. In the conversation, important issues like border disputes, restoration of direct flights and increasing trade arose. Even though this conversation was mostly symbolic, its effect was clearly seen on the morale of the investors, which created a positive atmosphere in the market.
New hope for investors
Long relations between India and China have been tense, especially after the clashes on the border in 2020, in which soldiers on both sides lost their lives. After this, protests against Chinese goods and companies were also seen in India.
But now that both countries are talking about mutual cooperation, investors hope that India can benefit in three important areas, increase in foreign investment, access to modern technology of manufacturing and participation in clean (green) energy supply chain.
Jasmine Duan, Senior Investment Strategist of RBC Wealth Management Asia, says, India can benefit more from this relationship, because at this time it is being affected the most due to America’s tariff growth. Investors are seeing this changed environment as a positive sign.
Raunak can return to the Indian market again
So far in 2025, the Nifty 50 index has increased by just 4.6%, while on the other hand the MSCI Emerging Markets Index has seen a fast of around 19%. This year, foreign investors took out about $ 16 billion from the Indian stock market, causing recession and uncertainty in the market. However, now experts have started feeling that the situation can change. Pramod Gubbi, the co-founder of the Marselus Investment Managers, says that the share of India was declining in the emerging markets, it can now stop. If India’s economic growth and profits of companies improve, then the impact of America’s tariff policy can be handled to a great extent. That is, in the coming times, investors may expect good returns from the Indian market again.
New support to market due to tax deduction
Both the Government of India and the Reserve Bank are trying to speed up economic development. Recently, RBI Governor Sanjay Malhotra indicated that monetary policy will still be soft. Since February, 100 basis points (ie 1%) have been cut in interest rates.
Also, a committee of finance ministers of the Central and State Governments has decided to reduce GST (GST) on more than 400 products. These are the same goods that contribute about 16% to the Consumer Price Index (CPI) basket. After this decision, there was a good rise in consumer goods manufacturing companies and auto sector shares.
Vaneck Associates Corp’s strategist Anna Wu says that “the softening in India and China, and the tax cut, both these things are beneficial signs for the Indian stock market in a long time. Apart from this, if the block of China-Russia-India is strong, then India’s global situation can be stronger.” Overall, the Indian market is expected to kill once again due to improvement in domestic policies and international relations.