PM Modi’s GST reform could trigger a demand-led rally, boosting auto, FMCG, apparel, and retail stocks while easing compliance for small businesses, say analysts.
The Nifty Auto index jumped 4.3%, emerging as the biggest beneficiary of the Centre’s proposed Goods and Services Tax (GST) changes, led by sharp gains in Hero MotoCorp (+8.35%), Maruti (+7.26%), and Ashok Leyland (+6.6%).
On August 15, Prime Minister Narendra Modi announced a major overhaul of the GST structure, describing it as a “Deepavali gift” for the people. Modi said that the next-generation GST framework is aimed at easing compliance for businesses and reducing the overall tax burden on households.
Maruti Suzuki hit a fresh all-time high after reports that the government is likely to slash GST on cars and two-wheelers from 28% to 18%, a move aimed at boosting demand and reviving consumer sentiment.
SEBI-registered analyst Akhilesh Jat identified Maruti as a strong beneficiary in entry-level and mid-segment car demand, while two-wheeler makers Hero MotoCorp & Bajaj Auto are expected to gain from rural demand recovery. He added that investors view the tax cut as a game-changer for auto sector growth and profitability.
A Streamlined Structure In Two Slabs
According to multiple reports, the Centre has decided to change the GST structure by cutting down the number of slabs to just two core rates – 5% and 18%. It is also likely to introduce a concessional rate below 1% and a steep “sin rate” of 40% for five to seven select items.
As part of this reform, the existing 12% and 28% brackets will be scrapped entirely. Nearly all goods in the 12% category are expected to shift to 5%, while about 90% of items under the 28% slab will move to 18%. Importantly, the new system will not include any cess over and above the GST rates.
Analysts Takes
Prime Minister Narendra Modi’s Independence Day address from the Red Fort carried announcements with the potential to directly influence market sentiment and corporate earnings in the months ahead. Two major measures stood out — a strong employment initiative and a significant overhaul of GST, said SEBI-registered analyst Pradeep Carpenter.
The Prime Minister promised a “Diwali gift” in the form of GST reforms. The overhaul includes lowering GST rates on several everyday items, simplifying compliance for small businesses, and moving many products from the 12% slab to 5%. Such changes could cut prices, boost festive spending, and ease costs for SMEs.
Sectoral implications are wide-ranging, Carpenter noted. FMCG and consumer durables may see a demand surge, while apparel, hospitality, travel, retail, and e-commerce are likely beneficiaries of higher festive consumption. Logistics, packaging, and even real estate could benefit indirectly from stronger jobs and demand growth.
For investors, the short-term outlook favors consumption-driven sectors ahead of Diwali, while medium-term gains depend on how effectively the schemes are rolled out, the analyst said.
However, risks remain, particularly the potential fiscal strain from lower GST revenues, Carpenter added. Overall, the announcements underline a clear policy push toward jobs and consumption, setting the stage for a demand-led rally.
Separately, Modi also spoke about the Pradhan Mantri Viksit Bharat Rozgar Yojana, designed to give a major push to youth employment.
Under the scheme, first-time job seekers will receive ₹15,000 from the government when they take up their first formal job. With a target of 3.5 crore jobs, the initiative puts immediate cash in the hands of young workers, increasing their purchasing power.
Higher spending on food, fashion, travel, gadgets, and education could benefit sectors like FMCG, retail, consumer durables, hospitality, and services, the analyst said.
Stocks Watch
Reacting to Prime Minister Narendra Modi’s Independence Day speech, SEBI-registered analyst Arun Mantri has highlighted these stocks as having strong growth potential.
GST boost – FMCG, consumer durables, and cement companies.
Defense – Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), and Bharat Dynamics Ltd (BDL)
Semiconductors – CG Power and Industrial Solutions and Dixon Technologies (India).
Nuclear energy – NTPC Green Energy and Adani Green Energy.
Critical minerals – Gujarat Mineral Development Corporation (GMDC) and National Mineral Development Corporation (NMDC).
Aerospace – Azad Engineering Ltd and MTAR Technologies.
Technology – HCL Technologies Ltd and Tata Elxsi.
Fertilizers – Rashtriya Chemicals and Fertilizers Ltd (RCF), Fertilisers and Chemicals Travancore Ltd (FACT), and Coromandel International Ltd.
Market Update
As of 10 am, the Nifty50 index was up 1.47% at 24,994.45, with all indices, barring IT, trading in the green. The Sensex was trading 1.33% higher at 81,667.03.
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