Nifty, Sensex trim gains after 1% surge; key factors fueling the rally

FMCG and auto stocks drove Nifty and Sensex higher by over 1 per cent each, alongside strong cement, insurance buying

Stock market rally today, September 04: Indian benchmark indices opened gap-up and outperformed most Asian peers on Thursday after the Finance Minister announced a two-tier Goods and Services Tax (GST) rate system to boost consumption. 

 

The NSE Nifty 50 Index rose as much as 1.08 per cent to 24,980.7 levels, the most since August 18, while the BSE Sensex rose 1.1 per cent to 81,456.6. The benchmarks, however, trimmed gains to trade 0.56 per cent and 0.55 per cent, respectively, as of 10:45 AM. 

 

Gains in the key indices were led by consumer goods and automobile stocks. Shares of cement, insurance, quick commerce and restaurant companies were also trading higher on Thursday.

 

   

The broader market, however, underperformed the frontline stocks as they only edged slightly higher. The Nifty Midcap 100 index was up 0.06 per cent, while the smallcap index was trading flat per cent, last seen.  

 

Furthermore, the market breadth remained skewed in favour of buyers. About 2,123 stocks rose, 1,643 declined, while 236 remained unchanged on the BSE.   

 

Key reasons behind the Sensex, Nifty rally today:

GST 2.0 cheer: The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, reached a consensus on Wednesday to adopt a simplified two-tier rate structure. The new rates will take effect from September 22, the first day of Navratri.

 

Tax levied on household consumption items, handicrafts, agriculture-related goods and more goods will not attract a 5 per cent tax. A special rate of 40 per cent will apply to all tobacco-related products. All individual life and health insurance policies will be exempt from GST. To know more about what gets cheaper, CLICK HERE. 

 

The GST reform has come better than expected, benefitting a wide spectrum of sectors, VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said. "The ultimate beneficiary is the Indian consumer, who will benefit from lower prices. The potential big boost to consumption in an economy that is already in growth momentum will be big and may surprise on the upside."

 

Sector-based buying: The gains in the indices were led by FMCG and auto stocks. Nifty FMCG rose 2.66 per cent while the Nifty Auto index was the top gainer on the NSE today, rising 3.7 per cent intraday. Stocks in cement and the insurance space also saw heavy buying activity on Friday. 

 

Motilal Oswal said the approved GST measures will benefit key sectors, including autos, consumer durables, staples, cement, hotels, insurance, retail, renewables, oil & gas, banks, NBFCs, logistics, quick commerce and EMS, with an economy-wide positive impact.

 

Strong economic data: Since last week, positive sentiments among investors and traders have mainly been driven by positive economic data points. India’s gross domestic product (GDP) grew 7.8 per cent in the first quarter (April-June) of the financial year 2025-26 (FY26), hitting a five-quarter high. The manufacturing purchasing managers index (PMI) touched a nearly 18-year high, while the services PMI hit a 15-year high. 

 

Global cues: Traders were also tracking positive cues from global markets. Most equity markets in Asia were trading higher as weak US economic data fueled expectations of rate cuts by the Federal Reserve. The MSCI AC Asia Pacific index was up 0.20 per cent, led by gains in Japan's Nikkei and Australia's S&P ASX 200 indices. 

 

Stocks on Wall Street closed higher job openings falling to a 10-month low, upping September Fed rate cut bets. The S&P 500 closed 0.51 per cent higher while tech-heavy Nasdaq was up 1.02 per cent.