Indian equities are set to open sharply higher on Thursday, with the Nifty pointing to a gap-up start for benchmark indices.
The upbeat sentiment comes a day after Finance Minister Nirmala Sitharaman announced sweeping GST 2.0 reforms, simplifying the tax structure into two primary slabs, 5% and 18%.
with a 40% slab for sin and ultra-luxury goods.
The reforms, effective September 22, aim to reduce the compliance burden, boost household demand, and fuel festive consumption. Analysts say the timing, just ahead of the Navratri-to-Diwali consumption season, is deliberate and could supercharge demand for cars, consumer durables, and everyday goods.
GST 2.0 Seen as Game-Changer for Demand
Calling the revamp the biggest overhaul since GST’s launch in 2017, the Finance Minister said the simplified structure would “put more money in consumers’ pockets.” Market experts believe the move will be a direct positive for sectors like FMCG, autos, and consumer durables.
Ajay Bagga, market veteran siad, “The strong macro support of a multi-quarter high GDP, strong PMI readings meets the income tax cuts meets strong government expenditure meets strong rural demand backed by a robust monsoon meets underperforming markets with low expectations meets, on top of all of these tailwinds, a most timely GST cut that will boost consumption, formalisation and unleash festive cheer. Indian markets are well positioned for a pre-Diwali rally and we may take out the September 2024 all-time highs on the back of all these positive triggers. If Trump drops the punitive 25% tariffs in addition, we may be setting up for a very remarkable Santa Claus rally for the Indian markets.”
Strong Maro Backdrop: PMI at Record Highs
Macro data also supports optimism. August PMI numbers showed:
Manufacturing PMI at an 18-year high
Services PMI at a 15-year high
Composite PMI at a 17-year high of 63.2
This signals broad-based output growth across both manufacturing and services, further strengthening the case for sustained market momentum.
Key levels to watch for: Nifty, Sensex, and Bank Nifty Levels
Sudeep Shah, VP & Head of Technical and Derivatives Research at SBI Securities, highlighted key technical levels ahead of Thursday’s session:
Nifty 50: The zone of 24,950-24,980 will act as a crucial hurdle. A sustained move above 24,980 may push the index to 25,100. On the downside, 24,700-24,670 will act as immediate support.
Bank Nifty: The index has been consolidating in a 600-point range around its 200-day EMA, a key support zone. The 54,600-54,700 range will act as resistance, with a breakout opening the path to 55,200. On the downside, 54,000-53,900 remains strong support.
Sensex: The benchmark closed above 80,500 with a bullish candle on Wednesday. Going ahead, 80,500-80,400 is immediate support, while the 20-day EMA zone of 81,100-81,200 will act as resistance.
Sector Spotlight: Metals, FMCG, and Consumer Durables Shine
On Wednesday, the Nifty Metal index surged 3.06%, emerging as the standout performer. Technical charts indicate further upside as the index gave a downward trendline breakout and the Nifty Metal/Nifty ratio chart showed an ascending triangle breakout.
Shah expects Metals, FMCG, and Consumer Durables to continue their outperformance in the near term, particularly as GST reforms ease costs and festive season demand picks up.
FII-DII Trends: Domestic Buying Supports Markets
According to Shah, Foreign Institutional Investors (FIIs) sold equities worth Rs 1,666.46 crore on Wednesday, while Domestic Institutional Investors (DIIs) bought Rs 2,495.33 crore, cushioning the market from deeper losses.
FIIs’ long-short ratio for index futures stood at 8.08, with net selling of 2,371 index futures, indicating a cautious stance. However, analysts believe strong domestic liquidity and retail participation will continue to support markets in the short term.
Outlook: Pre-Diwali Rally on the Cards
With a confluence of GST 2.0 reforms, festive demand tailwinds, robust PMI numbers, government spending, and rural strength, analysts say Indian equities are poised for a strong run-up into Diwali.