Is your stock portfolio ready for GST 2.0? Council meeting may rewrite market playbook

Strong enough to offset the impact of Trump's 'draconian' 50% tariff on Indian goods to a limited extent, the upcoming GST reforms could be a game-changer for investors who've seen Sensex and Nifty deliver negative returns over the past year. As the GST Council meeting kicks off today, stock market insiders are already repositioning portfolios to include favourites from autos, consumer durables, and discretionary consumption.

The two-day meet is expected to finalise the long-awaited rate rationalisation, with reports suggesting new slabs could be rolled out ahead of the festive season by September 22. Analysts estimate a 7–10% GST cut could translate into meaningful price reductions for two-wheelers, small cars, tractors, and select consumer goods—categories where buyers have already been deferring purchases in anticipation of lower rates.

Brokerages are broadly positive on the auto space. Jefferies expects GST cuts to lift FY26–28 auto industry volumes by 2–6%, driving 2–8% EPS upgrades for TVS, Hero MotoCorp, and Maruti Suzuki. "We expect TVSL and M&M to deliver the highest 27% and 19% FY25-28E EPS CAGR, respectively," the brokerage noted, upgrading Hero MotoCorp from Underperform to Hold.

Motilal Oswal echoes this optimism, highlighting visible green shoots in two-wheelers and tractors. "Maruti Suzuki is our top pick among auto OEMs, as its upcoming new launches and the current export momentum should drive healthy earnings growth. We like M&M given the uptrend in tractors and healthy growth in UVs," the firm said.

Nomura estimates a 100–150 basis point margin improvement potential for four-wheeler OEMs, even if they pass on all benefits to customers. "We estimate the benefit is likely to be larger for 4W OEMs than 2W OEMs. 4W OEMs offer higher discounts and hence have scope to reduce those," Nomura analysts wrote.

The timing couldn't be better for automakers. Passenger vehicle wholesales fell 2% YoY in August as customers postponed purchases ahead of GST clarity. Two-wheelers, however, rose 15% YoY, driven by TVS and Royal Enfield, while tractors posted robust 27–28% growth at Mahindra and Escorts.

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Consumption Revival on Cards

"GST 2.0 represents one of the most pro-consumption policy moves in recent years. By reducing prices in everyday categories and big-ticket durables alike, the reform could accelerate demand just as rural incomes and inflation trends are turning favourable," said Sonam Srivastava, Investment Manager on smallcase and Founder at Wright Research.

Wright Research sector analysis highlights that consumption staples are poised to deliver nearly 10% revenue growth in FY26, supported by input cost disinflation and renewed brand investment. Consumer durables are expected to achieve over 21% growth, although their trajectory will depend on the speed and effectiveness of GST reforms.

Umesh Kumar Mehta, CIO, SAMCO Mutual Fund, expects investor focus to shift decisively. "When the consumer will save on taxes, direct and indirect, he/she is not going to consume more soaps, the run rate is fixed, but certainly the incremental savings can go to discretionary spends like autos, fashion, lifestyle upgrades etc," he said.

Beyond the obvious beneficiaries, cement emerges as a surprising winner. Wright Research forecasts EBITDA to rise more than 40% and profit growth of nearly 80% for the sector, a trend that could be further amplified by a rate cut.

Meanwhile, internet platforms continue to be one of the strongest growth stories, with revenues expected to climb between 35–40% as digital adoption accelerates among MSMEs.

However, ICICI Securities sounds a note of caution: "If there are too many exceptions and exclusions for various products and services outside the simplified two-tier rate system, then it is likely to dilute the impact of the GST reform."

Nirmal Bang believes discretionary consumption is likely to be the bigger beneficiary of the tax cut, which includes automobiles and consumer durables. "In the near term, demand could come under pressure as consumers delay purchases. However, few FMCG items (packaged and processed foods) may benefit," the brokerage noted.

Morgan Stanley sees broader implications beyond immediate consumption. "Rationalisation of GST rates is likely to reduce prices for end consumers, which in turn should boost discretionary consumption. This is likely to be especially meaningful for the low income households as the rate cuts reduce regressive tax burdens, allowing inclusive growth."

If reforms are locked in by October 2025 as planned, India could be on the cusp of its strongest consumption upcycle in more than a decade, according to analysts. With the GST Council meeting underway, investors are betting that the long-awaited reforms will finally provide the catalyst Indian markets desperately need.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)