It may have been a rainy Monday, forcing Mumbaikars off the city's waterlogged streets, but bulls were out in force on the Dalal Street.
The BSE Sensex and the NSE Nifty 50 index surged more than one per cent in the morning with investors upbeat on the government's plan to restructure the Goods and Services Tax (GST) and cut slabs that should bring down indirect taxes on key products and services, in turn driving consumption and providing another boost to the economy. Investors also cheered India's credit ratings upgrade by Standard and Poor's (S&P) last week.
Eventually, the Sensex closed up 676 points or 0.8 per cent higher at 81,273.75, while the Nifty 50 ended 246 points or 1 per cent higher at 24,876.95.
It is expected that the GST structure will be simplified with only two major slabs—5 per cent and 18 per cent—although luxury goods would continue to attract a 40 per cent tax. This should bring down the cost of many consumption-related products, such as small cars, two-wheelers and consumer goods.
"GST reforms and rating upgrade indicate the strength of the Indian economy, fiscal stability and continued growth potential," pointed Ashwini Shami, chief portfolio manager at OmniScience Capital.
"Big cuts in the GST rates are expected to boost the consumption further. After the income tax cut and lower interest rates, this comes as the third stimulus to the consumption growth this year," Shami pointed out.
Not surprisingly, automotive and consumption-related stocks were among the major gainers on Monday. Maruti Suzuki was the biggest gainer on the Sensex, accelerating over 9 per cent. It hit a 52-week high of Rs 14,120 during the session.
Ashok Leyland jumped 8 per cent, Hero MotoCorp surged over 6 per cent, Bajaj Auto gained nearly 5 per cent and Mahindra and Mahindra rose more than 3 per cent.
"In the new regime, the government may reduce the tax on smaller cars to 18 per cent from 28 per cent and for bigger cars move them to a special rate of 40 per cent and cancel the cess on top of GST. This would mean, for smaller cars, prices may come down by 8 per cent and for bigger cars in the range of 3-5 per cent. In this scenario, OEMs like Maruti Suzuki would be a key beneficiary due to higher exposure to small cars," explained analysts at HSBC.
Should there be a flat 10 per cent GST reduction across sizes, then vehicles across categories will benefit with around a 6-8 per cent price reduction, they said.
Elsewhere, Hindustan Unilever was up 3.5 per cent, Tata Group's Trent gained nearly 3 per cent, and Titan rose 2 per cent.
Other than the GST expectation, market sentiment was further buoyed by S&P’s upgrade of India’s sovereign credit rating to 'BBB' from 'BBB-', marking the first such improvement in 18 years, pointed Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services.
The agency also raised the ratings of 10 Indian financial institutions, citing strong growth prospects, which fuelled optimism in banking and financial stocks, he added.
Axis Bank, Kotak Mahindra Bank, HDFC Bank and ICICI Bank rose around 0.5-1.3 per cent. Bajaj Finance and Bajaj Finserv surged 5 per cent and 3.7 per cent, respectively.
Sentiments were mixed in global markets in the backdrop of the US-Russia summit, which ended without any clear outcome. Japan's Nikkei 225 and Shanghai Composite in China gained around 0.8 per cent. But, European markets were down, with the CAC40 in France falling over 0.7 per cent and the German DAX index losing 0.4 per cent during trading.
"The rebound (in Indian markets) reflects renewed optimism, supported by policy tailwinds and improving technical indicators. However, lingering uncertainty on the global front—particularly regarding the India-US trade talks amid a potential delay in their meeting—may continue to weigh on sentiment," said Ajit Mishra, SVP, research at Religare Broking.
Not everything was in the green on Monday. Tech stocks, for instance, declined, while select pharma and healthcare stocks also ended lower.