Nifty extends its dropping streak into August. Will GST talks, upbeat GDP, and Modi’s China go to break the slide?

Indian equities closed out August with a second straight month of losses, because the Nifty fell 1.38% in a holiday-shortened month and recorded its weakest two-month stretch since early 2023. The benchmark index has been weighed down by U.S. tariff shocks, overseas fund outflows, and profit-taking throughout key sectors. Buyers now face a pivotal week that would check whether or not robust home development, tax reform talks, and a diplomatic reset with China can revive sentiment.

The Nifty 50 and Sensex every misplaced greater than 2.2% final week, dragged decrease by U.S. tariffs on Indian items. The United on August 27 doubled duties to 50% in response to India’s purchases of Russian oil, stoking fears of stress in export-heavy industries from textiles to metals and auto.

“Indian equities ended decrease this week as early optimism was overshadowed by sustained promoting amid rising international and home headwinds,” mentioned Vinod Nair, head of analysis at Geojit Investments. He famous that “the next imposition of tariffs on Indian items additional dented confidence, driving revenue reserving throughout sectors. Massive caps declined, whereas mid- and small caps noticed sharper losses on stretched valuations and heightened uncertainty.”

Overseas portfolio buyers pulled about Rs 527 billion from equities in July and August, extending outflows from muted earnings and tariff-related dangers. Brokerage Emkay International mentioned the direct GDP hit from tariffs may very well be restricted to about 0.5% of FY26, however warned of “important second-order dangers to asset high quality and employment.”

GDP resilience provides a buffer

India’s financial system, nonetheless, confirmed sudden power within the June quarter. GDP grew 7.8% year-on-year, properly above the 6.7% consensus estimate and better than the 7.4% enlargement within the prior quarter, BofA Securities famous.

“GDP development of seven.8% for the primary quarter of FY26 is encouraging and reconfirms the resilience of the Indian financial system within the face of ongoing tariff turmoil and regional wars,” mentioned Ashwini Shami, president and chief portfolio supervisor at OmniScience Capital.Shami pointed to companies development of 9.3% and a 9.7% bounce in authorities spending as key drivers, whereas non-public consumption rose 7%. “The anticipated decide up in home consumption, non-public sector capex development and sustained development in mounted capital formation shall present sustained financial development which is a robust optimistic for the fairness markets,” she mentioned.BofA mentioned the robust print “has all however dominated out a fee lower in October,” whereas sustaining its FY26 GDP forecast at 6.5% resulting from international dangers from tariffs and commerce disruptions.

GST Council assembly in focus

Consideration now turns to the September 3-4 assembly of the GST Council, the place Finance Minister Nirmala Sitharaman will chair discussions on rationalising the tax regime. Markets are betting {that a} three-tier construction may emerge, with consumption and auto sectors seen as prime beneficiaries.

“The following set off is GST 2.0, with the ultimate contours anticipated on 5-Sep-25: we see this as a serious development catalyst,” Emkay International mentioned, reaffirming its Nifty goal of 28,000 for September 2026.

Nair of Geojit Investments mentioned consumption-driven sectors—“FMCG, Durables, Discretionary, Cement, and Infrastructure”—stay properly positioned to profit from GST cuts and better authorities spending.

Modi visits China

Including a geopolitical dimension, Prime Minister Narendra Modi met Chinese language President Xi Jinping in Beijing on Sunday in his first go to to China in seven years, on the sidelines of the Shanghai Cooperation Organisation summit.

“We’re dedicated to progressing our relationships based mostly on mutual respect, belief and sensitivities,” Modi instructed Xi, in accordance with a clip posted on his official X account.

The assembly comes simply days after Washington imposed punishing tariffs, with analysts noting that Modi and Xi are looking for to current a united entrance in opposition to Western stress.

Outlook

Market watchers count on volatility to persist within the close to time period, with home development triggers offset by exterior headwinds. “A decision of tariff disputes may act as a key catalyst for market sentiment, though the reciprocal 25% tariff is anticipated to stay in place within the close to to medium time period,” mentioned Nair of Geojit Investments.

Whether or not strong GDP development, fiscal reforms, and geopolitical thawing can outweigh commerce dangers can be examined when markets reopen in September. For now, Nifty’s slide has left buyers weighing whether or not the home resilience story can overcome international turbulence.

Additionally learn | Rs 35,000 crore FII selloff in August. Can GST reforms, tariff aid and a robust GDP print flip the tide?

(Disclaimer: Suggestions, ideas, views and opinions given by the consultants are their very own. These don’t signify the views of the Financial Instances)