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Informist, Thursday, Nov. 6, 2025

 

By Anshul Choudhary

 

MUMBAI – The Indian equity market found new life after the government cut goods and services tax, which raised hope of a revival in consumption. Anticipation of better demand from consumers in the December quarter lifted stocks in October and is likely to keep pushing stocks higher in November as well, analysts said.

 

Market participants also hope India will sign a trade deal with the US in the coming months to lower tariffs, which had climbed to 50% in August. If all goes well, technical analysts expect the Nifty 50 to touch new lifetime highs in November. The median of 13 estimates showed the Nifty 50 could hit 26400 points this month, up over 3% from the current level.

 

The Nifty 50 had hit a lifetime high of 26277.35 points in September last year. The index came closest to the lifetime high two weeks ago, when it crossed 26100 points, only to see some profit-booking later due to expensive valuations. The Nifty 50 is still one standard deviation above its 10-year average based on one-year forward earnings per share estimates, IDBI Capital Markets & Securities said in a report.

 

Analysts don't expect any sharp fall in the market, at least till optimism around December quarter earnings sustains. The median of estimates shows the Nifty 50 is expected to find support at 25350 points, indicating a fall of less than 1%. On Tuesday, the Nifty 50 closed at 25597.65 points, around 700 points or 2.6?low the lifetime high.

 

EARNINGS, VALUTIONS

While hopes of a revival in earnings growth from the December quarter are high, analysts pointed out that the asking rate for the second half of the financial year is steep. Nifty 50 index companies' cumulative net profit for the June quarter, adjusted for exceptional items, had risen 8% on year. For the September quarter, the net profit of 36 companies of the index that reported quarterly results till Tuesday, is up only 1% when adjusted for exceptional items.

 

"Already two quarters, we are not up much...we need to have very great numbers to go to 12-13% growth rate...that looks difficult but 9-10% should be okay," Awanish Chandra, executive director at SMIFS Ltd., said.

 

The Nifty 50 is up nearly 9% so far this financial year, with most of these gains coming in the previous two months. The near-9% rise in the index follows mere 5% returns in FY25.

 

The poor returns from the market in more than a year is being seen as a "healthy correction" after the nearly 29% rise in the Nifty 50 in FY24. "India's hawkish macro set-up post-Covid is now unwinding. Relative valuations have corrected and likely made a trough in October," Morgan Stanley said in its strategy report Tuesday.

 

A major part of the optimism in the market stems from the cut in GST rates announced in September. Analysts said there are clear signs that demand improved after the lower GST made products cheaper. "It was evident before GST cuts that there was slowdown...post GST (cuts), at least the data we see for auto and others (show) things have moved up," Chandra said.

 

Automobile companies are being seen as the major beneficiary of lower GST, and that view has been cemented after companies reported growth in volumes across segments in October. In major relief for the industry, small car sales surged this festival season, with Maruti Suzuki's retail sales of small cars between Sept. 22 and Oct. 31 doubling to 250,000 units.

 

"Starting 22nd September, retail sales have taken off steeply and the festive season sales have been exceptionally good for us. So, the buoyancy of GST reduction will reflect in the future quarters," a top executive of Maruti Suzuki had said in the company's post-earnings conference call with analysts Friday.

 

Hope of better consumption is also likely to lift credit growth, which had slowed over the past year. Data from the Reserve Bank of India showed credit growth has improved slightly after the GST cuts. Credit growth for scheduled banks improved to 11.5% in the fortnight ended Oct. 17, significantly better than growth of just over 10% during the month before the GST cuts came into effect.

 

While consumption is expected to pick up, capital expenditure from the government is at the risk of a slowdown. Analysts caution that demand from the government is likely to come down as it may need to control its spending to fund the revenue loss from the cut in the GST and in income tax announced this financial year.

 

"On the revenue side, lower nominal GDP growth, personal income tax cuts and trailing disinvestment proceeds have led to a shortfall in H1 FY26 (Apr-Sept)," Nomura said. It expects a 15?cline in the government's capex spending in the second half of the current financial year to meet its fiscal deficit target of 4.4% of GDP.

 

Also, concerns over capex, along with high stock valuations, are likely to make it difficult for the market to post significant returns in the near term. Some analysts have even raised doubt over the long-term impact of GST cuts and said the lower taxes will drive demand only for a few quarters.

 

"While benchmark index valuations are not excessively stretched, the market needs a clear catalyst to sustain further upside momentum," IDBI Capital said. "In the absence of such a trigger, a range-bound movement with a slight upward bias appears most likely."

 

LOOKING ABROAD

Analysts attributed some part of the recent gains in the market to expectations of a trade deal with the US. Several media reports said the two countries are expected to sign a "framework agreement" soon. In the past few weeks, the US has made several comments in favour of a deal, saying it is "imminent" and that officials are in "serious discussion".

 

Analysts are not sure about when the deal will be announced. However, they acknowledged the market has partially factored in the deal and stock prices may fall if a deal is not announced in the coming months.

 

A sharp depreciation of the rupee has pushed foreign investors to sell Indian equities this year. The rupee has depreciated 3.6% this year after a near 3?preciation in 2025.

 

Analysts said selling pressure from foreign investors is likely to come down as the depreciation of the rupee has slowed in the past two months. Emkay Global Financial Services argued that the worst for the rupee is over as the Reserve Bank of India is likely to "defend the rupee from excessive depreciation and has the firepower to do so."

 

However, high valuations and lack of investment opportunities in India related to artificial intelligence may keep pushing foreign investors to other equity markets, analysts said. "...FPI positioning remains near lows, but net FPI buying will need growth to recover and/or bull markets elsewhere to fade, plus a rise in corporate issuances," Morgan Stanley said.

 

Foreign portfolio investors have been net buyers so far in the December quarter after being net sellers throughout the September quarter. They remain net sellers this year, having sold Indian equities worth INR 1.49 trillion.

 

Following are the support and resistance levels for the Nifty 50 index for November based on responses from 13 brokerages:

 

Broking firm	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	25700	25500	26100
Angel One	25500	25350	25900	26100
Axis Securities	25650	25300	26150	26400
Choice International	25400	25200	26000	26200
Globe Capital Market	25350	-	26350	26500
HDFC Securities	25450	-	26300	-
ICICI Securities	25400	-	26300	-
Kotak Securities	25200	25000	26500	26700
Lakshmishree Investment and Securities	25718	25500	26100	26300
LKP Securities	25500	25450	26500	26800
NVS Brokerage	25678	-	26180	26600
Religare Broking	25300	-	26500	-
StoxBox	25400	-	26400	-
Median	25350		26400

 

End

 

Edited by Avishek Dutta

 

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