GST reforms hopes, S&P upgrade lift Sensex, Nifty 50: Which sectors to invest in and how far can the rally go? Explained

The Indian stock market surged on Monday, August 18, driven by easing global headwinds and domestic policy optimism. Investors cheered hopes of a possible resolution to the Russia-Ukraine conflict, indications from US President Donald Trump about reconsidering secondary tariffs on India, and S&P’s upgrade of India’s sovereign credit rating. 

The Sensex jumped over 1,100 points to touch an intraday high of 81,765.77, while the Nifty 50 rallied to 25,022, reflecting broad-based buying interest.

"Dalal Street is cheering a string of positive developments after the weekend. The government’s proposal to overhaul the GST structure into a simpler two-slab system of 5% and 18% has been the key driver of today’s rally, particularly in tax and export-sensitive segments such as autos, consumer staples and insurance. Investors are also encouraged by the revival in private capex, which signals that the long-awaited investment cycle is turning up," said Saurav Ghosh, Co-founder of Jiraaf.

Analysts believe a GST overhaul will lift incomes across the economy by lowering costs and stimulating consumption. Combined with income tax reforms, this will empower Indian households to spend and save more, reinforcing domestic demand. 

"Taken together, tax reforms, stronger private investment and improved ratings are fueling optimism that India’s growth story is firmly anchored in internal resilience despite global trade frictions and stalled talks with the US," said Ghosh.

Sectors to Be Impacted

The rally was broad-based, with the Nifty Bank and Nifty Financial Services indices gaining 0.66% and 1.4%, respectively, following S&P’s upgrade of long-term issuer credit ratings for major banks and financial institutions including SBI, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, and Bajaj Finance.

The Nifty Auto index jumped over 4%, while the Nifty Consumer Durables index added 3.5%, reflecting optimism around GST-driven consumption. 

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, “Sectors like autos and cement, currently in the 28% tax slabs, are expected to benefit. Companies such as TVS Motors, Hero, Eicher, M&M, and Maruti may respond positively. Insurance companies are also likely to gain from the GST revision.”

Nikhil Gangil, Founder of Intrinsic Value, added that while today’s surge is largely sentiment-driven, structural gains could emerge in autos, kitchen appliances, and electronics. 

Agrichemical and fertiliser stocks remain resilient due to government protections against US imports, positioning these sectors well for mid- to long-term performance, he added.

Sensex, Nifty 50: More upside on cards?

Going ahead, Tarun Birani, Founder and CEO - TBNG Capital Advisors, advised investors that while momentum remains strong, near-term volatility is likely as further macro data and policy statements unfold.

On the technical front, analysts believe a decisive close can push the Nifty 50 index higher.

Vinit Bolinjkar of Ventura Securities said that the rally was triggered by pent-up bullish sentiment. “Foreign Institutional Investors have been net sellers in August, leaving long positions at historic lows. The Nifty’s formation of higher lows from the 24,350–24,400 support zone demonstrated resilience, setting the stage for upward movement. Profit booking by Domestic Institutional Investors may occur at higher levels, but the overall trajectory remains positive. A decisive close above 25,000 could drive new highs.”

Ajit Mishra noted that the Nifty 50 has surpassed the immediate hurdle of the short-term 20 DEMA and is now hovering around 25,000. A decisive break above this level could trigger further short covering, pushing the index toward 25,250 in the near term, Mishra said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.