The markets have seen a smart rally today after several days of lacklustre trade. The news of GST reforms by Diwali and a potential 2-rate structure buoyed sentiment significantly.
Some of the key segments/sectors that stand to benefit include consumer staples on the back of better demand, lower raw material costs, automobiles, especially four-wheelers, cement, hotels, retail consumer durables.
Motilal Oswal’s 25 stocks to watch on potential GST changes
The Government has proposed that most goods be subsumed in the 5% and 18% GST slabs and there are talks of doing away with the existing 12% and 28% slabs.
Almost 99% of the goods currently in the 12% slab (standard goods) are expected to be transitioned to the 5% slab, “which should lower retail prices by 4-5%, aiding household budgets. 90% of the goods in the 28% slab will likely be moved to 18%,” as per Motilal Oswal.
Motilal Oswal has created a sector-wise breakup of the key stock beneficiaries from Britannia, Maruti, Ashok Leyland, Ultratech to Voltas, LemonTree, HDFC Bank, and Bajaj Finance.
Auto
Motilal Oswal lists out 3 auto stocks that could potentially benefit from the 2-rate GST structure
-Maruti Suzuki: As per Motilal Oswal, “four-wheelers are in the 28% slab and should benefit from 18% GST rate”
-Tata Motors: Even this is another counter that Motilal Oswal believes could benefit fron the 18% GST rate.
-Ashok Leyland: “CVs can benefit from the lower GST of 18% Vs 28% currently.”
Banks
“The banking sector benefits as a whole, with consumption expected to pick up,” as per Motilal Oswal. The household confidence and demand for debt increase may drive “credit growth into double digits in H2FY26 and direct benefits for consumer-heavy lenders and credit card players,” as per the brokerage house.
Key stocks in focus include – ICICI Bank, HDFC Bank, IDFC First Bank
NBFCs
Bajaj Finance is another key stock that may benefit from lower “EMI obligation for consumer durables,” as per Motilal Oswal. NBFC lending in consumer durables is expected to get a boost.
Cement
The two cement stocks that may see significant advantage if the rates are reduced to 5% and 18% include UltraTech Cement and JK Cement. As per the brokerage house, not only is a lower GST rate a sentiment positive but it “can lead to 7.5%/8% lower prices as well.” Volumes however may not see a very drastic change.
Consumer Staples
HUL, Britannia and Voltas are the three key consumer staples on the radar. The majority of these items are in the 18% slab. Though staple companies generally benefit since several raw materials are at 12% rate, “the segment benefits as it is a core revival area for the government,” as per Motilal Oswal.
Consumer Durables
The AC makers are decidedly set to benefit from lower GST rates. With the rates proposed to be reduced to 18% from 28%, Motilal Oswal lists out two key beneficiaries- Voltas and Havells.
The brokerage house expects Havell’s to also benefit as “24% of its topline comes through Lloyd’s .”
EMS
From ACs to AC parts suppliers- Motilal Oswal lists out Amber as another beneficiary of the lower GST rates. “A key supplier to AC companies, it will benefit if RAC’s GST rate lowers from 28% to 18%,” they added.
Hotels
The mid-level hotels are seen as another key beneficiary of the lower GST rates, As per Motilal Oswal, Lemon Tree stands to benefit as “ GST on rooms below the Rs 7,500 ARR inventory can move lower to 5% from from 12%,” as per Motilal Oswal.
They also expect benefits for Indian Hotels from its Ginger business.
Insurance
Max Life, HDFC Life and Star Health are three insurance stocks on the Motilal Oswal list. According to them, “ There is a possibility of GST on senior citizens’ policies may be reduced to 5% or completely exempted. In such an eventuality, health insurers and term life-heavy insurers can benefit.”
Logistics
Delhivery is also seen as a key beneficiary on higher volumes or sales in the consumer durables and electronics sectors. As these form a large part of Delhivery’s volumes, Motilal Oswal sees the stock benefitting from the higher volumes.
Quick Commerce
The lower GST rate is also seen as a beneficiary of 2-rate GST structure. Stocks like Swiggy and Eternal (Zomato) are set to benefit from higher consumption trends. The quick commerce business is expected to see definitive gains from lower GST.
Retail
According to Motilal Oswal, “mass market products can benefit from a shift to lower slabs.” Earlier products with cost less than Rs 1,000 footwear had earlier increased to 18% from 5%.
Key stocks in focus include – Relaxo, Bata Campus
According to Motilal Oswal, “significant demand shifted to unorganized” and the latest proposals may lead to a significant advantage to organised players. “The tax arbitrage of the unorganised segment will shrink, benefitting organised players,” added Motilal Oswal.