Benchmark indices fell sharply from day's high on September 4 after they rose nearly 1% during early trading due to sweeping GST reforms. Amid broad-based buying, the 30-share BSE Sensex jumped 888.96 points to 81,456.67 in opening trade. The 50-share NSE Nifty surged 265.7 points to 24,980.75.
However, at closing, Sensex fell 700 points from day's high and Nifty ended below 24,850.
At closing, the Sensex was up 150.3 points or 0.19% at 80,718.01, and the Nifty was up 19.25 points or 0.08% at 24,734.30. About 1,714 shares advanced, 2,227 shares declined, and 139 shares were unchanged.
Here are key reasons behind market decline:
1) Profit booking
Common use items from roti/paratha to hair oil, ice creams and TVs will cost less, while tax incidence on personal health and life insurance will be brought down to nil after the all-powerful GST Council on Wednesday approved a complete overhaul of the GST regime. This led to a broad-based buying on stock markets. Auto, FMCG, consumer durable stocks led the rally.
From the Sensex firms, Mahindra & Mahindra jumped the most by over 7.5%. Bajaj Finance, Hindustan Unilever, Bajaj Finserv, ITC, Tata Motors and UltraTech Cement were also among the gainers.
However, profit booking pushed the markets towards day's low by the end with the broader markets turning red after trading in firm green in the morning trade.
While all sectors opened in green on September 4, by the time of closing, most sectors closed in green and the auto and FMCG sectors ended in green albeit with significant decline in gains.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said tariff issues will continue to haunt the market.
"The potential big boost to consumption in an economy that is already in growth momentum will be big and may surprise on the upside. This GST reform along with the fiscal and monetary stimulus already provided can trigger a virtuous cycle and boost India’s growth to 6.5% in FY 26 and perhaps 7% in FY 27 with impressive gains in corporate earnings. However, after the initial enthusiasm, tariff issues will continue to haunt the market," he said.
An analyst said the tax cuts were already priced in ever since they were announced on August 15.
"The Indian stock market is poised to embrace the proposed GST reforms, streamlining tax slabs to 5% and 18%. This reduction, especially from the 12% and 28% brackets, is expected to spur consumer demand ahead of the festive season, benefiting sectors like consumer durables, automobiles, and FMCG. However, stocks in these sectors have already surged in anticipation. The tax cut supports consumption-driven growth, but its success hinges on companies passing on savings to consumers. Markets will also factor in the long-term impact on government revenue and the broader economy. Technically, the Nifty is forming a double bottom in the 24,350-24,500 range. A break above the 24,770 resistance could target 25,000, and a close above this level may trigger a significant rally," said Santosh Meena, Head of Research at Swastika Investmart.
2) Mixed global cues
Asian equities slowed their advance as a selloff in Chinese stocks intensified, eroding earlier optimism about Federal Reserve policy easing after weak US job openings data.
In Asian markets, South Korea's Kospi and Japan's Nikkei 225 index traded in positive territory while Shanghai's SSE Composite index and Hong Kong's Hang Seng quoted lower.
MSCI's broadest index of Asia-Pacific shares outside Japan gave up early gains and was last down 0.2%, dragged lower by losses in China. The Shanghai Composite fell 1.6% and was on track for a third day of declines after a report in Bloomberg News that financial regulators are preparing cooling measures for the market.
Financial markets have started September in a downbeat mood, with a sell-off in longer-dated bonds dousing investor confidence ahead of critical U.S. non-farm payrolls on Friday.
U.S. stock futures were up 0.1% as investors took heart from the Fed's dovish comments, drawing buyers into beaten-down equities.
Market bets of a rate cut at the Fed's meeting later this month were also supported by weaker-than-expected job openings data in the latest "JOLTS" report on Wednesday.
The Federal Reserve's "Beige Book" painted a mixed picture of U.S. economic health, which appeared to underscore monetary policymakers' concerns. Analysts at ING described the report as quite "bleak" and noted that it was "littered with tariff warnings on prices."
Traders are now pricing in a 96.6% probability of a cut to interest rates at the Fed's September meeting, according to the CME Group's FedWatch tool.
3) FII selling continues
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,666.46 crore on Wednesday, while Domestic Institutional Investors (DIIs) bought stocks worth Rs 2,495.33 crore, according to exchange data.
DIIs have bought over Rs 5 lakh crore worth of equities, nearing last year’s all-time high. Foreign investors have pulled over Rs 1.3 lakh crore from Indian markets in 2025 so far, amid a rotation into China’s rallying equities. The outflows are approaching the record Rs 1.5 lakh crore exodus seen in 2022, reported Bloomberg recently.
Concerns that the US’s crushing 50% tariff on the country’s exports could hurt growth and the already weak company profits have dented sentiment.
DIIs' ownership of listed firms hit a record high of nearly 18% in March, surpassing foreign investors’ stake, according to Prime Database.
Indian equities have lagged behind their Asian peers this year, partly due to foreign outflows amid concerns over elevated valuations and expectations of muted returns.
With inputs from agencies
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