Sensex, Nifty soar as GST overhaul sparks market rally

Domestic equities roared back on September 4, with benchmark indices Sensex and Nifty jumping over one percent each, after the GST Council unveiled the most sweeping reform since the indirect tax regime was introduced eight years ago.

The BSE Sensex opened 888.96 points higher at 81,456.67, while the NSE Nifty gained 265.7 points to start at 24,980.75, as investor sentiment brightened on the back of tax rationalization expected to boost demand across sectors.

The Council, chaired by Finance Minister Nirmala Sitharaman, scrapped the four-tier system of 5, 12, 18 and 28 percent, and introduced a simplified two-slab structure of 5 and 18%. Effective September 22, the new rates are expected to bring down the cost of essentials — from soaps and shampoos to bicycles and packaged food — while exempting all individual health and life insurance plans. Luxury and sin goods, however, will face a steep 40 percent levy.

“This is a revolutionary reform that comes better than expected. The big winner is the Indian consumer, who will see lower prices and stronger purchasing power. The boost to consumption could be far larger than markets currently anticipate,” said V K Vijayakumar, Chief Investment Strategist at Geojit Investments.

Auto, FMCG, cement and insurance stocks led the rally. Nifty Auto surged 2.06 percent and Nifty FMCG 1.67%. Mahindra & Mahindra soared 7.27%, Bajaj Finance jumped nearly 5 percent, while Hindustan Unilever and Nestle India added over 2% each.

Insurance majors also gained, with LIC up 2.2%, ICICI Lombard rising 2.42% and HDFC Life advancing 1.43%.

Economists said the GST rationalisation, combined with RBI’s rate cuts, tax rebates in the FY26 Budget and easing inflation, could lift GDP growth by up to 120 basis points over the next year. “This will offset the drag from higher US tariffs and set the stage for a robust consumption cycle,” noted Garima Kapoor, EVP at Elara Capital.

White goods such as air conditioners and TVs will see tax rates drop from 28 to 18%. Small cars too will benefit, with models under 1200 cc (petrol) and 1500 cc (diesel) now taxed at 18 percent.

With markets cheering the reform, analysts expect momentum to continue as investors position for a consumption-led rally in Asia’s third-largest economy.