New Delhi | September 4, 2025

The Indian stock market witnessed a wave of optimism on Thursday as benchmark indices surged sharply following the Centre’s announcement of sweeping reforms in the Goods and Services Tax (GST) regime. The Sensex jumped by nearly 700 points in early trade, crossing the 81,000 mark, while the Nifty advanced by over 150 points to hover near 24,872 at 9:30 am.

The rally came just a day after Union Finance Minister Nirmala Sitharaman unveiled a major overhaul of the GST system, aimed at easing the burden on households and industries while supporting India’s economy against the backdrop of escalating US tariffs.

GST Overhaul: Fewer Slabs, Lower Rates

Launched in 2017, GST had been operating under a four-tier structure of 5, 12, 18, and 28 per cent. On Wednesday evening, the Finance Minister announced its simplification into a two-rate framework of 5 per cent and 18 per cent. The decision is expected to lower the cost of everyday items including medicines, toothpaste, small cars, appliances, and insurance premiums.

A special 40 per cent slab will apply only to luxury and demerit goods such as high-end cars, cigarettes, and tobacco products. The revised rates will be implemented from September 22, except for pan masala, gutkha, chewing tobacco, and bidi, which remain under existing duties.

Market Mood Turns Festive

The news triggered strong buying across sectors, with experts predicting a robust rally ahead of the festive season. Analysts say the cuts will not only boost consumption but also aid in greater formalisation of the economy.

Ajay Bagga, banking and market expert, told ANI, “We may take out the September 2024 all-time highs on the back of these positive triggers. The strong macro support of a multi-quarter high GDP, strong PMI readings, income tax cuts, government expenditure, rural demand backed by a robust monsoon, and underperforming markets with low expectations—all meet at the same time. On top of this, the GST cut will unleash festive cheer.”

He added that if the US eases its punitive trade measures, the markets could witness a “remarkable Santa Claus rally” later this year.

Trade Tensions in the Backdrop

The reforms come at a critical juncture, as India navigates mounting trade pressures from the United States. President Donald Trump has slapped tariffs of up to 50 per cent on Indian goods, citing New Delhi’s oil imports from Russia. The first tranche of 25 per cent duties came into effect on August 7, followed by an additional 25 per cent levy announced on August 25.

Despite these challenges, investor sentiment appears buoyant, with the GST relief seen as a timely cushion for both consumers and businesses.

Outlook

Market watchers believe the alignment of tax reforms, government spending, and global factors could set the stage for record-breaking highs in the coming months. For now, traders are betting on the twin boost of festive demand and lower taxation to drive India’s markets into a strong pre-Diwali rally.