FMCG stocks emerged as key gainers on Monday after news reports indicated possible GST rationalization. Currently, food and beverages fall under multiple slabs of 5%, 12% and 18%. Items such as ghee, butter, cheese, paneer, bottled water, juices, instant noodles, pasta, wafers and health supplements like Chyawanprash — many of which are taxed at 12% — may move down to the 5% bracket.

This potential change is expected to significantly benefit companies such as Bikaji Foods (with nearly 80% of revenue from these categories) and Gopal Snacks (around 85%), while Nestlé India could see relief across nearly one-third of its product portfolio. Dabur India (in beverages and Chyawanprash), ITC (in its other FMCG segment), and Britannia (dairy and wafers) are also likely beneficiaries, albeit to varying degrees. Sector majors like Marico and HUL may gain modestly.

Shares of Maruti Suzuki India Ltd and Mahindra & Mahindra Ltd (M&M) hit a record high in intraday trade on Monday after the government proposed two Goods and Services Tax (GST) rates of 5% and 18% last week.

If the GST Council adopts the proposed tax structure, then prices of automobiles would likely fall as GST on cars and two-wheelers would come down from 28% to 18%, making them affordable to a large section of consumers.

The rally was triggered following PM Modi’s Independence Day announcement of second-generation GST reforms, aimed at reducing the indirect tax burden on households and stimulating consumption.

The government plans to simplify the structure by merging most items into two slabs—5% and 18%—instead of the current four. Nearly all goods in the 12% slab are set to shift to 5%, while about 90% of those in the 28% slab may move to 18%, easing household budgets through lower retail prices.

The BSE Sensex surged as much as 1,168, or 1.44%, to 81,765.77, while the NSE Nifty jumped 390.7 points, or 1.58%, to reclaim 25,000 level. In the broader market, the Nifty Midcap100 and the Nifty Smallcap100 indices witnessed similar trend, with the indices rising as much as 1.5% each.

The strong rally made investor richer by ₹6.76 lakh crore as the total market capitalisation of BSE-listed companies climbed to ₹452.54 lakh crore from ₹445.77 lakh crore at the end of trade on August 14.

On the BSE Sensex pack, 24 out of 30 stocks traded in positive terrain, led by Maruti Suzuki India, Bajaj Finance, UltraTech Cement, M&M, and Bajaj FinServ.

On the other hand, HCL Tech, L&T, ITC, Sun Pharma, TCS and Infosys were the top six losers.

The BSE Sensex and NSE Nifty opened on a strong note on Monday, with benchmark indices rallying over 1% in opening trade. The 30-share Sensex rose 989 points to 81,587, and the NSE Nifty zoomed 315 points to 24,947 level.

"There are strong tailwinds for the market with potential to take it higher. Declarations by the prime minister on the next major reforms in GST by Diwali, is a big positive. The expectation is that most of the goods and services will be in the 5% and 18% tax slabs. Sectors like autos and cement which are presently in the 28% tax slabs are expected to benifit," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

TVS Motors, Hero, Eicher, M&M and Maruti are likely to respond positively to the news. Insurance companies are also expected to benefit from the GST revision. S&P 500 upgrading India’s sovereign credit rating is another major positive. But the market ignored this announcement since the negative news flows are also strong. India-US trade talks are unlikely to happen before August 27th deadline.

The ‘ Trump Sword’ of 50% tariff dangling on India will restrain the market enthusiasm which can be triggered by the positive news mentioned earlier. The outcome of today’s meeting at the White House for finding a solution to the Russia-Ukraine conflict will be keenly watched by the market, he added.

Indian equities are now positioned for positive momentum driven by the historic S&P ratings upgrade, upcoming GST reforms, and potential geopolitical stability from the Trump-Putin summit discussions, said Devarsh Vakil, Head of Prime Research at HDFC Securities.

The landmark ratings upgrade after 18 years signals enhanced investor confidence and could trigger sustained foreign inflows into Indian markets. Next-generation GST reforms expected by Diwali will streamline tax structures and boost consumption-driven sectors significantly. Geopolitical developments, particularly potential ceasefire talks between Russia and Ukraine following Trump-Putin engagement, could reduce global risk-off sentiment.

Nifty is likely to encounter an immediate resistance around 25,000 levels, where aggressive call writing has been observed in the weekly expiry, followed by 25,200–25,300 levels. Any close below 24,500 levels would result in further unwinding of long positions, which might drag Nifty to 24,000–24,200 levels.

The week is likely to start on a cheerful note, as markets draw optimism from Prime Minister Narendra Modi’s Independence Day address. His statement on a potential GST rate reduction ahead of Diwali has the potential to significantly boost sentiment and lift equities out of the bear grip, said Santosh Meena, Head of Research at Swastika Investmart.

Adding to the positive backdrop are several domestic factors, including easing interest rates, record-low inflation, and a favorable monsoon. “Together, these macroeconomic drivers, along with expectations of GST cuts, could provide the much-needed trigger for a bullish reversal in Indian equities, even as tariff-related headwinds continue to weigh on global markets,” he added.

On the global front, investors will react to the August 15 meetings between U.S. President Donald Trump and Russian President Vladimir V. Putin in Alaska, which both leaders described as “productive,” though progress on Ukraine remains unresolved. Additionally, the U.S. Federal Reserve meeting minutes and upcoming U.S. macroeconomic data - including building permits, housing starts, FOMC minutes, jobless claims, and flash PMI surveys - will be crucial for market direction.

On the domestic macro front, market participant will closely monitor the HSBC India Manufacturing, Services, and Composite PMIs to gauge growth momentum. The market will also react to historic sovereign rating upgrade by S&P Global, which raised India's long-term credit rating to 'BBB' from 'BBB-' with a stable outlook.

The direction of foreign fund flows will also play a crucial role in setting the tone for the domestic equity market. In August so far, foreign institutional investors (FIIs) have offloaded Indian equities worth ₹24,190 crore through the exchanges. However, this selling has been more than offset by strong domestic institutional investor (DII) inflows, with purchases totaling ₹55,790 crore.

Going forward, the FII activity will be influenced by the action on the tariff front, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. Latest news of easing of tensions between the U.S. and Russia and no further sanctions on Russia indicate that the secondary tariff of 25% imposed on India is unlikely to come into effect after August 27th.

Another positive factor which can influence FII behaviour is the rating agency S&P raising India’s credit rating from BBB-to BBB, he added.

Top stocks to watch today include ONGC, Power Grid, NTPC, and Tata Power after S&P Global Ratings upgraded their credit ratings to ‘BBB’ with a stable outlook. Banking majors such as SBI, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank, along with NBFCs Bajaj Finance, Tata Capital, and L&T Finance, will also be in focus following similar rating upgrades.

Other stocks likely to see action are KEC International, Alembic Pharma, EMS, Torrent Power, PVR Inox, Somany Ceramics, JK Cement, Lemon Tree Hotels, Dixon Technologies, EaseMyTrip, and Vedanta on the back of key order wins, project approvals, expansions, regulatory updates, and strategic acquisitions.

Indian equity benchmarks, BSE Sensex and NSE Nifty, are set to rally in opening trade on Monday, despite mixed cues from global peers, following Prime Minister Narendra Modi's announcement of GST reforms in his Independence Day address.

Sentiment is further expected to get a boost from S&P’s upgrade of India’s sovereign credit rating to investment grade, the first in 18 years and the highest in 35 years, as well as the likely pause on the 25% tariffs on India’s exports to the U.S. after some progress in U.S.-Russia talks.

At 8:20, GIFT Nifty futures were up 309 points at 24,964, signalling a strong opening for the benchmark indices.