This Month in Markets: Navigating significant Reforms, Events, Volatility and key takeaways
Performance recap
The Indian stock market has witnessed high volatility in the month of September as first half was uptrend, last half was downtrend and market closed flat for the month. The month closed with a minor gain of 0.8% with nifty closing at 24611 and Sensex closing at 80268. Trump tariff impacted the market sentiments, though the first half was sustaining the impact with rally but as more tariff announcements kept coming in market reversed all the gains. Central Government announced major GST Reforms 2.0 applicable from 22nd sep’25 to boost economy and consumption by giving relief to citizens but that did not lift market sentiment. In a rare occurrence, nifty formed 9 red candles consecutively from 19th sep which has happened only 7 times in nifty nearly 30 year history and has never formed more than 9 candles. The only relief was that fall was smaller and nifty corrected around -3.5% during this 9 days. The fall was contained as DII kept supporting the markets with around Rs 30k crores buying against Rs 20k crores selling by FII in this 9 days. All major global markets including US markets outperformed Indian market significantly during the month and overall for the year as well. US markets and most other market formed their life time high whereas Indian markets are still down around 6% from the high made in sep last year. Trump Tariff and FII selling were the major concern, however there were few positive factors for the month like huge DII buying, GST reforms, softening of crude oil prices, rbi policy accommodative stance by keeping repo rate unchanged. Overall FII sold for 35000 crores in Sep whereas DII bought for 65000 crores in same period. Generally market has performed well after consolidation and corrections, with festive season and other positive factors, Indian market should perform better in near future. However few key concerns to track are US tariff policy developments and geo political risks.
Key event highlight – GST Reform 2.0
Background and context
The Goods and Services Tax (GST) reforms introduced in September 2025 represent a landmark step in reshaping India’s taxation system to better serve the aspirations of its youth. By simplifying tax structures, reducing rates across key industries, and addressing long-standing anomalies, these reforms are designed to create an enabling environment for entrepreneurship, job creation, and affordable living. Sectors with high youth participation—such as education, automobiles, technology, handicrafts, footwear, healthcare, food processing, and textiles —have been prioritized to lower costs, boost competitiveness, and encourage innovation. Beyond reducing the financial burden on households and businesses, the reforms strengthen India’s vision of inclusive growth, sustainability, and empowerment of the next generation.
Key reforms under GST 2.0
The new GST regime, GST 2.0, intends to simplify the tax structure by decreasing the slabs and changing rates. Significant changes are announced at the 56th GST Council meeting lowering the price of necessary goods, decreasing insurance premiums, and shift high-consumption goods into lower tax brackets. GST rate cuts on 200 items will happen from 22nd September 2025. 90% of items in the current 28% slab are moved to the 18% slab. Almost 99% of the items in the 12% slab are moved to the 5% slab
Simplified tax structure
The previous four-tier system of 5%, 12%, 18%, and 28% has been largely streamlined into two main rates, with a separate rate for luxury goods.
- Merit rate (5%): For essential and commonly used goods and services.
- Standard rate (18%): For most other goods and services, including many items previously in the 28% slab.
- Demerit rate (40%): A new, higher rate for “sin” and luxury items, replacing the earlier 28% plus cess structure.
Structural and procedural improvements
Beyond rate changes, the GST 2.0 reforms address systemic issues to promote economic growth:
- Resolving inverted duty structure: Changes were made to tax rates in sectors like textiles and fertilizers to fix the issue where inputs were taxed higher than the final products, easing working capital for manufacturers.
- Enhanced compliance: Measures like pre-filled GST returns, faster and automated refunds for exporters, and smoother registration for MSMEs aim to simplify business operations.
- Dispute resolution: The operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT) is expected to provide a quicker mechanism for resolving tax disputes.
Economic impact
The GST 2.0 reforms are expected to benefit both consumers and businesses:
- Increased purchasing power: Lower taxes on essentials and other goods are projected to increase household savings and boost consumption, especially in rural areas.
- Support for MSMEs: Simplified compliance and reduced costs for inputs are expected to benefit small businesses and encourage formalization of the economy.
- Stimulated economic growth: The demand boost from lower prices, along with structural corrections, is anticipated to create a virtuous cycle of economic growth and job creation.
Way forward
The GST system in India is set for huge change in the future. The government wants to make it all simpler, more predictable, and more compliant. The next-generation GST reforms are likely to address structural issues, lower tax rates on essential goods, and support MSMEs. As the implications of the changes to the GST law begin to take effect, both businesses and consumers can expect a tax system that is more efficient, transparent, and growth-focused.
Sectoral performance
Majority of the sectors witnessed volatility and variations in the performance though nifty were flat for the month. Sectors which underperformed the most in sep month are IT -4%, media -4%, fmcg -3% and pharma -2%. Sectors which outperformed were PSU +11%, metals 10%, auto 6% and energy 4%. Midcap made a gain of 1.5% and smallcap gain of 1% during the month. Sectors under performance and out performance continue driven by news, earnings and policy impact, hence sectors rotation and rebalancing can be done to take advantage. Diversification across sectors adds stability and is also important from risk management perspective.
Global Market outlook including commodity
The Federal Open Market Committee (FOMC) delivered a 25-basis-point interest rate cut at its September 2025 meeting, lowering the federal funds rate target range to 4.00% to 4.25%. This was the first rate cut since December 2024. The decision to cut rates was influenced by signs of a weakening labour market, despite inflation remaining above the Fed’s 2% target. The next FOMC meeting is scheduled for October 28-29, 2025, where markets are anticipating another quarter-point rate cut. Ongoing tariff uncertainties and persistent inflation remain key factors influencing the Fed’s policy decisions. Government shutdown delays key data ahead of FOMC meeting. A partial federal government shutdown began on Oct. 1, shuttering many non-essential services including the Bureau of Labor Statistics (BLS). This shutdown has indefinitely delayed the September jobs report — a crucial gauge of labour market health expected early this month. This data freeze comes just weeks before the Federal Open Market Committee’s (FOMC) Oct. 28–29 meeting, where the Fed’s next interest rate decision will be announced. Despite this disruption, market optimism remains elevated. US and global markets have rallied further on expectation of rate cuts and steady economic growth. However, there are still global uncertainties and risks like high government debt, unemployment, lingering inflation, uncertain policy environments, tariff trade war, geo political events. Hence, the volatility may continue despite resilience shown by the markets amidst valuation concerns. Gold & Silver have performed exceedingly well concerning this challenges and continuing spectacular gains despite minor corrections in between. Investors are seeking refuge in bullion due to economic uncertainties, bullish momentum and favourable fundamentals. Adding them in portfolio is part of diversification and risk management technique. However a word of caution that bigger and faster rally in any asset class may follow longer period of consolidation and correction (price and / or time). Gold is currently trading at Rs 116k/ 10 gm and Silver at Rs 151k/ 1kg.
Outlook for the Indian Market
Indian market has underperformed most other markets for the year, recent months and this corrections offer opportunity to Investors to add quality stocks in the portfolio. Consolidations and corrections are usually followed by market rally with events and policies having short term impact. Investors should stick to the discipline of regular systematic investing for long term. The outlook remains positive with volatility for near term. Global market, events and policies will further drive the market. Further, consult your investment advisor for prudent financial practices.
Fundamental outlook: Indian market witnessed high volatility throughout the year and has been in corrections mode since last September. FII have sold to the tune of Rs 2.5 lakh crores in this year as on date and DII has absorbed all the selling with buying of Rs 5.8 lakhs crores. SIP flows have continued from retail investors, which have sustained the market and the selling pressure. Increasing numbers of mainboard and SME IPOs shows strength and stability in the market. Low VIX environment also indicates stability in the market. With festive season around, market sentiment may improve further and market may try to reclaim lifetime high this year. However we need to track global market events and policies announcements.
Technical outlook: Indian market is showing consolidation at lower levels and has bounced few times from nifty levels of 24500. Nifty is trading mix on technical parameters. Nifty is trading at monthly RSI of 63 and weekly RSI of 55 which indicates neutral to mild uptrend. Nifty immediate support is seen at 24250 and resistance at 25750.
