SENSEX zooms 1,745 points, NIFTY50 jumps over 2% in five sessions; top four factors behind the spectacular rally

The Indian equity benchmarks rose for the fifth straight session on Wednesday, August 20. In the last five trading sessions, the 30-share SENSEX has advanced as much as 1,745 points, or 2.17%, and the National Stock Exchange benchmark NIFTY50 index has soared as much as 598 points, or 2.44%, to hit a one-month high of 25,085, data from the NSE showed.

Here are the key reasons boosting surge in markets.

The bullish sentiment on the Street returned after Prime Minister Narendra Modi on Independence Day announced overhauling the Goods and Services Tax (GST) regime by Diwali in order to spur consumption, thereby boosting the economy. The sentiment among market participants had turned sombre after US President Donald Trump announced steeply higher tariffs on Indian goods exported to the US earlier this month.

PM Modi on Sunday clarified that the Centre has circulated the draft of the next-generation GST reforms among states and sought their cooperation to implement the proposal before Diwali.

PM Modi had announced the proposal to reform the GST law in his Independence Day speech.

As per reports, the central government has proposed two tax rates of 5% and 18% in the revamped GST, which is likely to replace the current indirect tax regime by Diwali this year, highly placed sources told news agency Press Trust of India (PTI).

The Centre has sent its proposal, which removes 12% and 28% slabs, to the panel of state finance ministers on GST rate rationalisation. They will now discuss it and place it before the GST Council. The council is expected to meet next month.

The sentiment was also supported after global credit ratings agency S&P last week (August 14) upgraded India's sovereign credit rating to 'BBB' with a stable outlook after a gap of nearly 19 years, citing robust economic growth, political commitment for fiscal consolidation and 'conducive' monetary policy to check inflation.

"India remains among the best-performing economies in the world... The quality of government spending has improved in the past five to six years," S&P Global Ratings said.

The impact of US tariffs on the Indian economy will be "manageable", S&P said, adding that a 50 per cent tariff on US exports (if imposed) will not pose a "material drag" on growth.

Meanwhile, S&P added that high US tariffs are unlikely to impact India's long-term growth prospects, as the government is focused on economic reforms and trying to improve the standard of living of people.

Strengthening relations between India and China in the backdrop of trade uncertainties triggered by the US is also acting as a key reason for Indian markets to surge. Chinese Foreign Minister Wang Yi assured External Affairs Minister S Jaishankar that Beijing will resume supplies of fertilisers, rare earth minerals and tunnel boring machines (TBM), reported the Hindustan Times on Tuesday, easing concerns for Indian manufacturers hit by shortages.

Jaishankar had raised the matter during his visit to China last month and again sought resumption of shipments of urea, NPK and DAP fertilisers, as well as rare earths and TBMs, according to the report.

Wang, who reached New Delhi on Monday, told Jaishankar that India-China relations are showing a positive trend towards returning to cooperation, state-run Xinhua reported.

The ongoing rally in the markets is being supported by gains in heavyweights like Reliance Industries, Infosys, Tata Consultancy Services, HDFC Bank, Bharti Airtel, Eternal, Maruti Suzuki and Mahindra & Mahindra.

Auto and consumer discretionary sector shares have outperformed, as these sectors will get direct benefit from lower GST, as the products they make attract a higher tax rate of 28%, which is likely to come down to 18%.