GST rate cut: How is CLSA tweaking its portfolio ahead of the Council meeting verdict

The GST reforms remain in focus, with the Council meeting, which kicked off earlier today amid global trade tensions and weak equity returns. With investors already repositioning portfolios towards autos, consumer durables, and discretionary consumption, the reforms could emerge as a game-changer for markets battered by Trump’s tariffs and a volatile macro backdrop.

Analysts say the two-day deliberation could deliver a 7–10% cut, potentially slashing prices of two-wheelers, small cars, tractors, and select consumer goods ahead of the festive season.

In an interaction with ET Now, Vikash Kumar Jain of global brokerage CLSA said that the upcoming GST announcements could play a decisive role in shaping market positioning, with the consumption theme emerging as the biggest beneficiary.

He highlighted that while earnings momentum has been steady, the September quarter will likely be less relevant for investors due to the impact of GST changes on sales patterns. Instead, the trajectory of government policy on GST will determine sectoral winners going forward.

In his interaction, Jain remarked that “because of this GST change the earnings of the upcoming quarter, which is the September quarter will matter much less and that is pretty well understood by the market because there has been some kind of a delay in sales because of the changes in GST which is likely and that is very well accepted by the market now.”

He added that the focus should shift from short-term earnings to the implications of the GST rate cut, noting that “if the final announcement comes out as out and out positive for consumption, then this becomes a crucial binary event where you start favouring consumption even more.”

Jain said CLSA’s current portfolio setup reflects this stance, with key exposure across defensives, consumption and rate-sensitive sectors.

“Our current setup is where we have, since we do not expect a lot of significant absolute upside from the markets because it is still more expensive than global peers, our setup, our favoured areas are defensive sectors number one, consumption, and rate sensitives,” he explained.

Detailing the firm’s overweight bets, Jain pointed out, “When I say defensives, staples, utilities, and IT are our overweights. Along with that, if you were to look at consumption, then autos, along with staples, fall in that bracket, and autos with real estate also fall in that bracket of rate sensitives. Small overweight in banks and more stock-specific kind of overweight in energy.”

He also cautioned that positioning could be reassessed depending on the final policy outcome, stating that “some of these events could make us rethink and look at positioning even more closely if we have to change something, make it more extreme or change into another sector.”

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