Why did SENSEX, NIFTY50 fail to hold on to early gains on Thursday after GST bonanza?

Indian equity benchmarks failed to hold on to strong early gains on Thursday, September 4, after the government announced a sweeping overhaul of the goods and services tax (GST) regime on Wednesday.

The SENSEX surged as much as 889 points in morning trade, while the NIFTY50 touched an intraday high of 24,980.

However, profit-booking in the later half of the session erased most of the gains, and the SENSEX eventually ended just 150 points higher at 80,718. The NIFTY50 index rose 19 points to close at 24,734.

Persistent FII Selling

Foreign institutional investors (FIIs) have been consistently selling Indian equities, putting pressure on large-cap stocks.

FIIs offloaded shares worth ₹34,993 crore in August and another ₹12,257 crore so far in September, taking their total net outflows this year to ₹1,42,892 crore.

FPI ownership in NSE-listed companies slipped to 17.3%—the lowest in 13.5 years. While FPIs increased exposure to Nifty50 firms (24.5%, the highest in six quarters), they stayed cautious on mid- and small-cap counters.

Sectorally, FIIs remained overweight on financials, turned positive on communication services, and stayed wary of consumer staples, energy, and materials.

Sluggish Q1 Earnings

Weak corporate earnings added to the cautious mood. India Inc posted its slowest year-on-year net profit growth in eight quarters for Q1 FY26. Revenue growth also hit a three-quarter low.

Revenue declined 3% QoQ, its worst drop in eight quarters, while operating profit shrank 6.5% QoQ, the sharpest in three years.

Worries over 50% tariff

Trade tensions with the US further weighed on investor sentiment. President Donald Trump once again defended his decision to impose a 50% tariff on Indian imports, calling India the “most tariffed nation in the world” before claiming New Delhi had offered him a “no tariff” deal.

While Commerce Minister Piyush Goyal expressed optimism about finalising a bilateral trade agreement by November, talks remain stalled after the US deferred an August 25 negotiating round.

The uncertainty around tariffs and trade policy dampened hopes of a near-term resolution.