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Change Of Guards amid GST Relief Rally

ICICIdirect Research 05 Sep 2025 DISCLAIMER

Equity benchmarks break two-weeks of losing streak and closed at 24,770 with a gain of ~ 1%. Despite an initial surge following GST rate rationalization announcements, markets witnessed significant profit-booking from higher levels. Nifty midcap and small cap relatively outperformed the benchmark by gaining 2%, each. Sectorally, Barring IT and Realty all indices closed in green where, Auto, Metals and Consumer Durable were the major outperformers.

What to expect: Nifty reclaimed 100-day EMA, suggesting a potential pause in the prolonged corrective phase and scope for trend reversal. Going ahead, holding 24200 levels and closing above the upper band of the range 25,000 will fuel further upward momentum failing to do so we expected a broader consolidation in the range of 25000-24200.

Nifty Auto Index : Index witnessed a strong breakout from the weekly Inverse head & shoulder formation, supported by GST reforms. The breakout signals potential continuation of momentum with scope to retest its all-time high with a 10% upside potential in next couple of quarters.

Accumulation Strategy: Current consolidation phase presents opportunities to accumulate quality stocks backed by strong earnings, particularly those positioned to benefit from next-generation GST reforms and upcoming festive season

Bond Yield & IT : The US 10-year bond yield has broken down from contracting triangle on daily time frame, A sustained decline in the yield is likely to reinforce the positive correlation with the IT index, offering supportive cues for the sector.

Market breadth: The % of stocks above 50 days EMA has bounced from the oversold zone of 25-30 and improved where it is currently placed at 36 offering incremental buying opportunity.

Broader Market: Both Nifty Midcap and small cap has been trading in the vicinity of 52-week EMA which has been held since April 2025 offering an incremental buying opportunity.

Key Monitorable for the coming week:

Development of Bilateral trade deal negotiations
US PPI/CPI MoM/Labour data
INDIA CPI
U.S. Dollar index continues to trade below the past two years breakdown area of 100, indicating corrective bias while crude oil sustaining below 20-week EMA and closed the week on a negative note.

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