Why the Indian Stock Market Will Rally in September and October 2025: GST Cuts, Inflation Easing, and Festive Season Boost

The Indian equity markets have displayed remarkable resilience in 2025, shrugging off global uncertainties and marching ahead on the strength of domestic demand and policy support. As we step into September and October, the stage looks set for a powerful festive rally.

Historically, these months have favored the bulls, and this year the rally could be even stronger thanks to two game-changing macroeconomic drivers: the Prime Minister’s GST reform and inflation cooling to multi-year lows, paving the way for RBI rate cuts. Let’s decode why investors have every reason to stay optimistic.

1. Seasonal Tailwind: The Festive Rally

The festive season in India has always been synonymous with increased spending, and the markets reflect this consumption boom.

  • Consumption-driven rally: Demand for automobiles, consumer electronics, FMCG, and real estate typically spikes during Ganesh Chaturthi, Navratri, and Diwali.
  • Investor sentiment: Festive months are considered auspicious for investments, further fueling liquidity.
  • Historical trend: Over the past decade, Nifty has delivered positive returns in 7 of 10 Sept–Oct periods, with average gains of 4–6%.

👉 This seasonal momentum provides the base layer of optimism for September–October 2025.

2. PM’s GST Reform: Two-Slab System to Boost Consumption

In a landmark move, the government has announced a simplified two-slab GST structure with rate cuts across key consumption categories.

  • Simplification → Removes compliance hassles, making taxation business-friendly.
  • Lower Costs for Consumers → Reduced GST rates mean cheaper goods, stimulating household consumption.
  • Festive Demand Multiplier → Families shopping for vehicles, appliances, and consumer goods during festivals will directly benefit.
  • Corporate Upside → Higher sales volumes translate to stronger earnings, particularly for autos, retail, and FMCG firms.

👉 This reform is a direct consumption booster, arriving just in time for the festive surge.

3. Inflation Cooling & RBI Rate Cut Cycle: A Market Turbocharger

Inflation is now at multi-year lows, giving the RBI headroom to cut rates. This could prove to be a turbocharger for equities.

  • Cheaper Borrowing → Affordable housing, auto, and business loans encourage spending and investment.
  • Corporate Growth → Lower financing costs improve margins and enable expansion.
  • Liquidity Boost → Easier credit conditions attract both domestic and foreign capital into equities.
  • Investor Sentiment → Historically, dovish RBI policies combined with low inflation have sparked some of India’s strongest bull runs.

👉 With inflation under control, markets get the double benefit of liquidity and confidence.

4. Strong Domestic Liquidity & Retail Participation

  • SIP Inflows: Record highs above ₹22,000 crore/month ensure steady market inflows.
  • Rising Demat Accounts: NSE added 4 million new accounts in Q2 2025, proving retail strength.
  • DII Buying: Domestic institutions continue to counter FII volatility, providing a cushion.

👉 Every dip is being aggressively bought, ensuring an upward trajectory.

5. Robust Corporate Earnings

Q1 FY26 results beat expectations across sectors:

  • Banks & NBFCs → Strong loan growth, falling NPAs.
  • Capital Goods & Infra → Multi-year order book highs, fueled by govt spending.
  • IT Services → Early signs of revival in global tech demand.

With Q2 results due in October, the market is pricing in sustained earnings momentum.

6. Government Spending Ahead of Elections

With the 2026 General Elections approaching, government capex is at full throttle:

  • Infra & Defense Push → Roads, railways, renewables, and defense remain priorities.
  • Rural Consumption → Pre-election welfare schemes are expected to accelerate.

👉 Infra, PSU banks, and manufacturing could see sectoral rallies.

7. FII Flows & Global Cues

  • FII Sentiment Turning Positive → Global investors are eyeing India as US Fed rate cuts approach.
  • Stable Crude Prices → Oil staying range-bound supports India’s macro.
  • China Slowdown → Foreign investors are reallocating capital from China into India.
  • Strong GDP → India’s growth forecast at 6.5–7% keeps it the fastest-growing large economy.

8. Technical Setup: Markets Ready to Break Out

  • Nifty → Strong support near 23,000–23,500, consolidation before breakout.
  • Bank Nifty → Outperforming with strength in PSU and private banks.
  • Mid & Small Caps → Broader participation signals retail confidence and bullish breadth.

Conclusion: A Perfect Recipe for a Festive Rally

All indicators seasonal trends, GST reform, low inflation, robust liquidity, strong earnings, govt spending, and supportive global cues—point toward a bullish September and October.

Sectors to watch:

  • Banking & Financials → Credit growth + rate cuts.
  • Autos & FMCG → Festive demand + GST cuts.
  • Infra & Defense → Government spending momentum.
  • IT & Pharma → Revival of exports.

📌 Gujju Traders View:
We remain optimistic heading into the festive months. Our strategy is to use dips as buying opportunities and stay invested in high-conviction themes: banking, consumption, infra, and manufacturing. With policy support and macro stability aligning, September–October 2025 could mark the start of a memorable rally for Indian equities.