Global markets are buzzing with excitement over potential Fed rate cuts, and Indian equities are hinting at a bright start. However, Nifty might not get a significant boost just yet. Despite a promising start, the benchmark index failed to hold a crucial technical level on Thursday, leaving traders wondering if the market can regain its momentum. Consumer-facing stocks could remain in focus, as investors favor sectors which offer some stability amid tariff woes.
Stage set for global funds to return?
India’s policy mix is looking more investor-friendly these days. A cut in the goods and services tax, an earlier reduction in personal income tax, and a full percentage point trim in interest rates by the central bank are giving global funds reasons to take another look. HSBC Holdings Plc.’s Strategist Prerna Garg argues that the significant withdrawals by global funds — about $15 billion this year — could ease once earnings growth picks up in the fourth quarter of 2025. With the risk of downgrades fading, pro-growth policies along with a favorable base have cleared some of the fog around the market outlook, Garg said.
India’s wage problem
But tax cuts and lower rates may not be enough to tackle a deeper problem: stagnant wages. Bank of America Corp.’s India Economist Rahul Bajoria points out that urban wage growth has trailed nominal GDP for most of the past two decades, and momentum stalled after peaking in 2022. The result is a squeeze on household demand, even as corporate profits climbed to a 15-year high in FY24. In short, without stronger paychecks, tax relief alone may not be enough to unlock consumption.
Hospital shares cool to tax cut on health cover
One corner of the market that didn’t cheer the tax break was hospitals. The government exempted individual health insurance premiums from GST, which should make policies more affordable and lift demand for healthcare services. Yet, investors seemed less enthused, with hospital stocks trading mixed. The muted reaction likely reflects the fact that many names — Global Health, Narayana Hrudayalaya, Krishna Institute of Medical Sciences, Aster DM Healthcare and Fortis Healthcare — have already surged by up to 44% this year. Tax relief may improve the sector’s long-term outlook, but in the near term, much of the good news seems baked in.
And, finally..
Consumer-facing sectors welcomed India’s tax cuts, but the benchmark index stumbled at a familiar hurdle. The Nifty 50 once again failed to break past its 50-day moving average, surrendering most of the day’s gains. With much of the tax relief already priced in, traders are now watching whether this inability to clear a key resistance level is a warning of a deeper selloff ahead.
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