GST Reforms Set to Drive Gains in Auto, Banking, and Cement Stocks: Report

The upcoming GST slab rationalisation is expected to stimulate consumption and improve profitability in industries like autos, financials, cement, and consumer staples, a report published on Monday stated.

Passenger and commercial cars, whose 28 percent tax is to be reduced to 18 percent, are likely to gain from lower effective prices and increased volumes, "Maruti, Tata Motors, and Ashok Leyland stand to benefit from lower effective prices and increased volumes," wrote the Motilal Oswal Financial Services (MOFS) report.

With an increase in household expenditure, the research house expects increased demand for lending. Banks such as ICICI Bank, HDFC Bank, and IDFC First Bank may see faster growth in retail loans, while Bajaj Finance can expect lower EMIs on consumer durables.

In the infra segment, cement players will benefit as a GST cut from 28 percent to 18 percent could lead to a reduction in cement prices by about 7–8 percent.

Consumer goods companies like HUL and Britannia are expected to gain from lower input costs, with a number of raw materials shifting to lower GST slabs.

Consumer durables companies such as Voltas, Havells, and Amber Enterprises can expect higher volumes, and hospitality chains such as Lemon Tree and Indian Hotels can become more appealing. Moreover, if GST on health insurance policies of senior citizens is cut from 18 percent to 5 percent—or exempted—insurers such as Niva Bupa, Max Life, HDFC Life, and Star Health are likely to benefit.

Increased consumption in the household segment will also help logistics players like Delhivery. Such quick commerce players like Swiggy and Eternal are likely to witness increased activity due to higher household spending.

Last but not the least, the migration of footwear and other mass items to lower slabs will most likely lower tax arbitrage for the unorganised sector, benefiting organised players like Relaxo, Bata, and Campus.