Recent GST rate cut may act as potential stimulus to lift sentiment

The coming week (the week beginning on Monday) is set to be crucial for Indian capital markets, with the recent GST rate cut acting as a potential stimulus that could lift sentiment and trigger sectoral rallies, countering the negative sentiment of tariffs in the near term. At least that's what market analysts feel.

While the GST relief may boost near-term optimism and drive momentum in consumption-driven and domestic demand sectors, the longer-term trajectory will ultimately hinge on corporate earnings growth in the upcoming quarters, deal between India and US impact on tariffs, which will shape sustained market direction, a recent study by Capital Trust group said.

One must also keep in mind that on September 10, 2025, China Inflation Rate (August) is forecasted below zero at (-0.1 per cent) YoY, continuing the disinflationary trend that has characterised China's economy amid weak domestic demand.

Looking back on the week gone by, Benchmark indices ended the week on a strong footing, with Nifty50 advancing 1.29 per cent to 24,740.45 and Sensex rising 1.14 per cent to 80,718.01. Optimism around potential GST 2.0 reforms and resilient domestic sentiment drove the rally, aided by robust traction in autos and financials, though selective profit booking emerged amid ambiguity over input tax credit claims.

Interestingly, the Indian rupee briefly touched a record low of 88.36/$ on tariff jitters, but timely RBI intervention managed to contain volatility, stabilizing market sentiment. Technically, Nifty formed a bullish candle on the weekly chart, reclaiming the 20 and 50 EMAs, signaling trend reversal and strengthening momentum, market analysts pointed out. RSI maintained an upward slope, while MACD sustained a bullish crossover with an expanding histogram, reinforcing positive undertones. Sectorally speaking, Autos and FMCG led gains on demand resilience and policy optimism, while IT and consumer durables witnessed profit taking. On the commodities front, gold rallied on dovish Fed cues, and crude oil firmed amid easing geopolitical tensions and stronger demand signals, according to capital market analysts.

Foreign Institutional Investors (FIIs) were net sellers through the week, particularly midsession, unloading equities worth approximately Rs5,667 crore, while Domestic Institutional Investors (DIIs) absorbed supply with steady inflows, providing a crucial domestic cushion, acquiring equities to the tune of Rs 13,444 crore.

Market analysts pointed out that the Nifty 50 gained 1.29 per cent last week, sustaining above its 21-week and 55-week EMAs, with strong contributions from metals, consumption, and FMCG sectors. The index now faces a key resistance zone at 24,900–25,000, aligned with this week’s high.

Experts are of the view that a decisive break-out above this range could trigger a move toward 25,250. On the downside, immediate support is seen at 24,550, while 24,300 remains a stronger base, defended over the last two weeks. The overall structure remains positive, and a “buy on dips” approach near support zones continues to be the preferred strategy for positional traders.

If various analysis available are anything to go by, with risk-to-reward dynamics favouring long positions near support, a “buy on dips” approach remains advisable, provided the index holds above 53,500 on a closing basis.