Nifty extends its shedding 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 might check whether or not robust home progress, 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 following 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.”

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

GDP resilience presents a buffer

India’s economic system, nevertheless, confirmed surprising energy within the June quarter. GDP grew 7.8% year-on-year, nicely above the 6.7% consensus estimate and better than the 7.4% growth within the prior quarter, BofA Securities famous.

“GDP progress of seven.8% for the primary quarter of FY26 is encouraging and reconfirms the resilience of the Indian economic 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 providers progress of 9.3% and a 9.7% bounce in authorities spending as key drivers, whereas non-public consumption rose 7%. “The anticipated choose up in home consumption, non-public sector capex progress and sustained progress in mounted capital formation shall present sustained financial progress which is a powerful constructive for the fairness markets,” she mentioned.BofA mentioned the robust print “has all however dominated out a charge lower in October,” whereas sustaining its FY26 GDP forecast at 6.5% attributable to 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 high beneficiaries.

“The subsequent set off is GST 2.0, with the ultimate contours anticipated on 5-Sep-25: we see this as a serious progress catalyst,” Emkay World 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 nicely positioned to learn 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 line 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 searching for to current a united entrance in opposition to Western strain.

Outlook

Market watchers count on volatility to persist within the close to time period, with home progress 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 predicted to stay in place within the close to to medium time period,” mentioned Nair of Geojit Investments.

Whether or not strong GDP progress, fiscal reforms, and geopolitical thawing can outweigh commerce dangers might 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 reduction and a powerful GDP print flip the tide?

(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t symbolize the views of the Financial Occasions)