Proposed GST reform fires up Dalal Street bulls, Nifty rallies 300 points driven by auto stocks

Auto stocks led the gains on the bourses on Monday, August 18.

Bulls were fired up in trade on Monday, August 18, leading the benchmark indices Nifty 50 and Sensex to stage a fiery rally of around one percent each, supported by sharp gains in auto, consumption, metal and realty stocks. Investors cheered the reports of a simplified Goods and Services Tax (GST) structure, which would boost spending and spur consumption.

GST may be rationalised into two major slabs: five percent and 18 percent, according to most reports, with a sin tax rate of 40 percent. Brokerages noted that the development would be a massive positive for India as it is a consumption stimulus, spurring sales and revenue growth.

"This is a rerating trigger from the market, given the long-term growth benefits to the economy. We revise our Nifty target to 28,000," said Emkay Global. The brokerage added the GST rationalization offsets near-term worries on weak growth and tepid earnings.

"The six-week downtrend should now reverse, as the outlook for earnings improves considerably, and valuations will factor in the broader positives of this big-ticket reform measure."

At close, the Sensex was up 676.09 points or 0.84 percent at 81,273.75, and the Nifty was up 251.20 points or 1.02 percent at 24,882.50. About 2319 shares advanced, 1447 shares declined, and 133 shares unchanged.

The sectoral action for the day was led by Nifty Auto, which surged 4.4 percent, followed by Nifty Realty up 2.6 percent and Nifty Metal gaining 2 percent. FMCG and PSU Bank indices also traded firm, rising 1.5 percent and 0.6 percent, respectively. On the flip side, Nifty IT slipped 0.4 percent, while Energy, Pharma, and Media were largely flat.

The broader markets outperformed the benchmarks, with the Nifty Midcap 100 advancing 1.3 percent and the Nifty Smallcap 100 gaining 1.4 percent.

Technically, a decisive move above 24,750 could open the way for an upside toward 24,900 and 25,000, while immediate support lies at 24,600 and 24,500 — both considered attractive zones for fresh long positions, noted Amruta Shinde, Technical & Derivative Analyst, Choice Broking.

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