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GST Reduction Sparks Demand; Geopolitics Boost Defence
27 Dec, 2025
Summary
- Fiscal measures, including tax rate moderation and GST cuts, stimulated consumption.
- GST reductions provided an immediate demand boost across key sectors.
- Geopolitical events fueled a 17% rise in defence stocks despite market volatility.
To invigorate the economy, the government enacted fiscal policies that included moderating income tax rates and subsequently reducing the Goods and Services Tax (GST). These strategic GST reductions have successfully stimulated demand across crucial sectors, including automotive, consumer goods, and manufacturing, offering a tangible short-term uplift.
Brokerages anticipate that these GST cuts may also foster sustained earnings growth over the long term. Concurrently, the defence sector has experienced a notable surge, with its index climbing 17% despite a generally volatile year for equities. This rise is directly attributed to a series of significant geopolitical events that have drawn investor attention to defence stocks.
Key triggers for the defence sector's performance include Operation Sindoor in early May 2025, where Indian Armed Forces conducted precision strikes in response to a terror attack, as well as ongoing instability from the Russia-Ukraine war and Middle East conflicts, which have acted as further catalysts for investor interest.
