The recent interview between Prime Minister Narendra Modi and Chinese President Xi Jinping and the tax reduction by the government have led to a new life in the Indian stock market. Experts believe that these incidents could improve the poor state of the Indian stock market, which has been lagging behind other emerging markets in the last few months.
The interview between Modi and Jinping took place on August 31 in the city of Tianjin, China. In the meantime, the two leaders discussed mutual cooperation. Important issues, such as border disputes, direct flights and increase trade, came into negotiations. Although these negotiations were mostly symbolic, the impact was clearly seen on the morale of the investors, which created a positive atmosphere in the market.
New hope for investors
India and China have long been a tension, especially after a border collision in 2020, in which soldiers of both parties lost their lives. After this, there was also opposition to Chinese goods and companies in India.
But now that the two countries are talking about mutual cooperation, investors hope that this can benefit India in three important sectors, increase foreign investment, access to modern production technology access and clean (green) supply chain.
RBC Wealth Management Asian Senior Investment Strategist Jasmin Duan says India can gain more than this relationship, as it is currently being most affected by the US tariff increase. Investors are looking at this changing environment as a positive sign.
The Indian market may return to shine
So far in 2025, the Nifty 50 index has increased by only 4.6%, while on the other hand, the MSCI Emerging Markets Index has seen an increase of about 19%. This year, foreign investors withdrew nearly $ 16 billion from the Indian stock market, which led to a downturn and uncertainty in the market. However, experts have now begun to feel that the situation may change. Pramod Bubby, co-founder of Marcelus Investment Managers, says that India's stake in emerging markets, which was falling, can now be closed. If India's economic development and profits of companies improve, the impact of US tariff policy can be controlled to a great extent. That is, in the coming days, investors can expect good returns from the Indian market again.
New support to the market with tax reductions
Both the Government of India and the Reserve Bank are trying to speed up economic development. Recently, RBI Governor Sanjay Malhotra hinted that the monetary policy would still be soft. Since February, interest rates have been reduced by 100 basis points (ie 1%).
Also, a committee of finance ministers of central and state governments has decided to reduce GST on more than 400 products. This is the same goods that contribute about 16% to the customer price index (CPI) basket. Following the decision, shares of consumer goods companies and auto sector saw a good increase.
Anna Wu, a strategist at Venek Associates Corp, says, “Both of these things are beneficial indications for the Indian stock market in the long run. In addition, if the China-Russia-India block becomes stronger, India's global position can become stronger.” Overall, the Indian market is expected to come alive once again due to local policies and reforms in international relations.
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