Tariff woes abate; GST reforms next growth leg: Emkay Global Financial

Emkay Global Financial Services has maintained its Nifty target at 28,000 for September 2026, as it sees the worst-case scenario for tariffs to have played out and the rationalisation of goods and services tax (GST) as the next growth catalyst. 

 

Albeit the near-term headwinds, Emkay Global remains constructive on a consumption revival cascading from multiple fiscal and monetary stimuli. 

 

Year-to-date (Y-T-D), Nifty50 has risen over 4 per cent and Sensex nearly 3 per cent. Meanwhile, Nifty FMCG has slipped 1 per cent. 

Market outlook 

Tariff worries abate

As the US imposed an effective 50 per cent tariff on imports from India as of August 27, 2025, Emkay believes the direct hit appears to be contained at 0.5 per cent of gross domestic product (GDP) for FY26, with a negligible impact on earnings of listed equities.

 

 

However, the second-order risks that could dent asset quality and consumption remain critical, even if the immediate earnings shock is small. 

 

Secondary order risks

The report highlighted three main spillovers. First, potential non-performing loans (NPLs) could emerge in textiles and jewellery, sectors that account for about 1.2 per cent of bank loans, while exposure to small and medium enterprises (SMEs) adds an unquantified credit risk. This, however, should be mitigated by potential government or the Reserve Bank of India (RBI) support.

 

Second, the affected sectors employ about 0.3 million workers, leaving the low-income segments vulnerable to layoffs and weaker mass-segment consumption. Third, there is a potential 1.2 per cent risk to the current account deficit (CAD), if the rupee weakens in the short term, especially if foreign investors (FPIs) continue to sell their holdings. The FPIs have already sold ₹52,700 crore worth of equities in July and August 2025.  Track Stock Market LIVE Updates

GST 2.0 

The GST Council is scheduled to meet from September 4 to September 5, 2025, to discuss the new reforms. Reports have suggested that there will be a three-tier rate structure—5 per cent/12 per cent/40 per cent with no cess. 

 

The key challenge for the Council will be to convince the state governments, as GST forms a large part of state revenue. It is 23 per cent of FY25P revenue receipts and 44 per cent of FY25P own tax revenue (OTR) that put the fiscal deficits of states more at risk than those of the Centre. Thus, Emkay reckons the GST rationalisation will be a net fiscal expansion rather than revenue-neutral, with the 40 per cent category remaining narrowly scoped.

Bond market stress to persist 

The bond market has already shown signs of strain. The 10-year government security yield is up 32 basis points (bps) since June 2025, and the outlook remains fragile, according to . Weak nominal GDP growth (projected at 7.8 per cent for FY26E) and GST 2.0 pressures — an estimated 0.1–0.2 per cent addition to the fiscal arithmetic for FY26/27 — could sustain bond-market volatility. Still, the brokerage does not expect a major spillover to equities; it argues that any earnings recovery from GST and monetary stimulus could offset the negative impact of rising yields on equity multiples.

Strategic ideas and stock screener

Maintaining a constructive medium-term stance, Emkay favoured ‘Overweight’ rating to discretionary and industrials. The note also outlined a GARP-style stock screener (earnings and return thresholds plus valuation filters) and flagged ideas from its universes: CG Power, Apollo Hospitals, Coforge and Lemon Tree Hotels.

 

Momentum names with recent EPS upgrades included Shree Cement, Muthoot Finance, Tata Chemicals, and Pfizer.