Proposed GST reforms, Trump-Putin summit likely to drive markets this week

Plans for big bang reforms in the GST regime by Diwali, the Putin-Trump summit and S&P upgrading India's sovereign credit rating are likely to instil optimism in the domestic equity market in the week ahead, analysts said.

Besides, trends in global markets and the trading activity of foreign investors would also impact domestic investors' sentiment.

Prime Minister Narendra Modi on Friday announced plans for big bang reforms in the GST regime by Diwali, which will bring down prices of everyday items, as his government looks to overhaul the eight-year-old tax structure plagued by compliance issues, evasions and litigation.

"The week ahead is likely to start on a cheerful note, as markets draw optimism from Prime Minister Narendra Modi's Independence Day address. His statement on a potential GST rate reduction ahead of Diwali has the potential to significantly boost sentiment and lift equities out of the bear grip," Santosh Meena, Head of Research at Swastika Investmart, said. 

Meanwhile, India on Saturday welcomed the summit talks between US President Donald Trump and his Russian counterpart Vladimir Putin in Alaska that ended without a ceasefire deal.

After an almost-three-hour meeting with the Russian president, Trump said, "Some great progress" has been made, but did not provide any details.

S&P on Thursday upgraded India's sovereign credit rating to 'BBB' with a stable outlook after over 18 years, citing robust economic growth, political commitment to fiscal consolidation and 'conducive' monetary policy to check inflation.

"Going forward, the FII activity will be influenced by the action on the tariff front. Latest news of easing of tensions between the US and Russia and no further sanctions on Russia indicate that the secondary tariff of 25 per cent imposed on India is unlikely to come into effect after August 27th. This is a positive.

"Another positive factor, which can influence FII behaviour, is the rating agency S&P raising India's credit rating from BBB- to BBB," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

On the global front, the US Fed meeting minutes and upcoming US macroeconomic data will be crucial for market direction, Meena said.

"The Prime Minister's vision for GST 2.0 is a timely and strategic move to build a resilient Indian economy. These are not merely procedural changes; they are essential structural reforms designed to mitigate the risks arising from global trade tensions.

"By addressing the inverted duty structure, we are unlocking crucial working capital and making our exports more competitive on the global stage," said Saurabh Agarwal, Tax Partner, EY India.

Last week, the Sensex climbed 739.87 points or 0.92 per cent, and the Nifty edged higher by 268 points or 1.10 per cent.