Opinion: Talking Point This Week: GST Overhaul Plan, Trump-Putin Summit Spark Optimism

Prime Minister Narendra Modi, in his Independence Day speech, announced a major overhaul of the Goods and Services Tax (GST) system scheduled for rollout by Diwali. These reforms aim to significantly reduce the tax burden on common citizens and MSMEs by simplifying the existing structure—proposing to replace multiple tax slabs with just two main rates, standard and merit, while applying special rates only to select items. The reforms will also address longstanding issues like inverted duty structures, classification disputes, and compliance complexities, creating a more stable and business-friendly environment. These may well have the ability to bring about a spike in markets.

Demand outlook for the festive season and the second half of FY26 remains positive — this was the key takeaway at the Emkay Conference. The brokerage house said that many of the company managements were seeing signs of demand recovery and are positioning themselves accordingly. The sentiment was echoed across multiple categories, in both—discretionary and staples. Lenders supported this by painting an optimistic outlook for loan growth later in FY26. They see no broader issue in demand and expect a large part of the incremental liquidity to flow to the retail segment. The overall tone, says Emkay, remains optimistic, with continued expectations of a demand recovery in H2FY26. Central government capex seems to be reviving and players operating in that space are optimistic. The Chief Economic Adviser reiterated that the government does have contingency plans in place, to counter the impact of a negative tariff outcome. Coupled with the GST rationalisation spoken by PM Modi, maybe the optimism wasn't unfounded.

Jubilant Foodworks posted largely inline results, with strong performance in Turkey offsetting slower margins in India. Vishal Mega Mart continued its streak of robust growth and margin expansion, marking another quarter of double-digit same-store sales gains. Anupam Rasayan beat expectations, driven by solid pharma, polymer, and agrochemical recovery, with profits sharply higher. Apollo Hospitals’ Q1 exceeded estimates with healthy gains in revenue, margins, and profit. Nykaa’s Q1 delivered standout growth in revenue, profitability, and margins, supported by a renewed focus on market penetration and premiumisation. Astral saw a revenue decline amid weaker PVC prices and inventory losses, but its piping and adhesives divisions showed strong volume and value growth. Awfis, Tilaknagar Industries, and HBL Engineering reported significant improvements in margins and profits, demonstrating strong growth momentum. Yatra and Genus Power Infra stood out for exceptional gains in revenue, profitability, and margin, both running ahead of guidance for the year.

Bank of America is cautious on India, warning that sustained higher tariffs of 25-50% could pose downside risks. The risk-reward for foreign investors remains unfavourable, and they don’t anticipate a revival in FII flows just yet. While small and midcap stocks still look pricey overall, BofA notes a few areas of opportunity emerging, especially within Building Materials, Auto Components, and Travel/Tourism. Notably, they’ve shifted their stance on sectors—upgrading IT from Underweight to Overweight and moving Utilities from Underweight to Neutral. Let's see if they retain their cautious stance now that there is a measure taken by the Indian government.