Nifty 50: 25,012
Bank Nifty: 55,860
Sensex: 81,741 Record Highs:
Nifty 50: 26,277
Bank Nifty: 57,842
With Diwali 2025 approaching, investors are asking: can India’s benchmark indices reclaim or surpass their record highs? After a six-week correction, the market staged a strong rebound on August 18, driven by a confluence of domestic reforms and global optimism. Experts believe five key factors will determine whether this rally sustains and accelerates.
1. Withdrawal of US Tariffs
The biggest external overhang has been the secondary tariffs imposed by the US on countries importing Russian oil, including India. President Trump has hinted at a rollback, contingent on progress in the Russia-Ukraine peace talks.
- A rollback to the 19–20% range could trigger strong foreign portfolio inflows.
- India’s fundamentals remain intact, and S&P’s recent upgrade to BBB reflects resilience despite tariff risks.
- Easing trade tensions would boost sentiment across emerging markets.
2. GST Reforms
Prime Minister Modi’s Independence Day speech unveiled next-generation GST reforms, expected to be implemented before Diwali.
- Products currently taxed at 12% and 28% may shift to 5% and 18% slabs.
- This could boost consumption, especially in auto, FMCG, and consumer durables.
- Analysts expect a rerating of the market, with Emkay Global revising its Nifty target to 28,000 for September 2026.
3. Corporate Earnings Revival
India’s macro backdrop is favorable: GDP growth remains strong, inflation is easing, and rural demand is recovering.
- Q2 and Q3 FY26 earnings will be critical. Broad-based growth across sectors could act as a trigger.
- Sectors like banking, capital goods, and autos are expected to lead the earnings rebound.
4. RBI Rate Cuts
With inflation under control, the Reserve Bank of India is expected to cut rates in its October policy review.
- Lower borrowing costs would stimulate investment and consumption.
- Rate-sensitive sectors like banking, real estate, and autos could benefit significantly.
5. Global Liquidity and Sentiment
Global cues remain supportive:
- The Trump-Putin summit in Alaska, though inconclusive, signaled easing geopolitical tensions.
- US Fed is expected to maintain a dovish stance, supporting global liquidity.
- India VIX remains low, indicating stability and reduced volatility.
Sectoral Momentum
- Nifty Auto surged 4.5% on GST cut expectations.
- Nifty Consumption rose 2.4%, led by packaged foods and beverages.
- Bank Nifty gained 1.3%, with HDFC Bank, ICICI Bank, and Axis Bank showing strength.
Technical Outlook
- Nifty 50 is trading above key moving averages, with resistance at 25,200 and support at 24,650.
- Bank Nifty needs to sustain above 56,000 to challenge its previous high of 57,842.
- A breakout above 25,200 for Nifty and 56,500 for Bank Nifty could confirm bullish momentum.
Conclusion
The stage is set for a potential rally toward record highs before Diwali 2025. While global uncertainties remain, the domestic setup—reforms, earnings, and liquidity—is highly favorable. Investors should watch for confirmation through earnings and policy announcements in the coming weeks.
Strategy:
Traders should monitor breakout levels and maintain disciplined stop-losses.
Long-term investors may consider accumulating quality stocks in banking, auto, and consumption.
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