GST 2.0 Reform Boosts Markets, Business Sentiment; Check Key Stock Beneficiaries: Motilal Oswal Report

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Motilal Oswal Report

The resolute stance on simplifying the GST structure should not be seen just as ‘tax reform’ but more as ‘growth reform’. Through simplified rates and processes, the government intends to boost consumption sentiment.

As the Prime Minister has indicated, there will be further reform measures across multiple domains, intended to unleash the animal spirits of the economy, providing a shield against the global geopolitical headwinds. 

The government is clearly in an overdrive to lift and stimulate the domestic economy, and the latest announcements on GST, once implemented, will be the first big structural reform of the government in the current term.

In our view, this will also kickstart a cycle of positive uptrends for the Indian equity market, which has been a key underperformer over the past year. The current valuations at ~20.8x (vs long period average of 20.7x) are reasonable and have room to expand given our estimates of double-digit PAT growth (10%/12% PAT growth for Nifty/our universe).

Key sector beneficiaries

The approved measures are likely to yield economywide benefits and favorably impact several sectors. Key segments/sectors that will benefit include: Automobiles (across most segments), Consumer Durables (RACs, TVs, DWs), Consumer Staples (food, fruit drinks, HPC), Cement, Hotels (sub-Rs 7,500 room rate inventory), Insurance (retail health and life), Retail (footwear, apparel – below Rs 2,500 price, electronic retailers), Renewables (solar cells), Oil & Gas (benefits through CNG cars), Banks+NBFCs (second-order beneficiary of better consumption demand), Logistics (second-order beneficiary of higher volumes), Quick Commerce (second-order beneficiary of higher volumes), and EMS (better demand for ACs).

Key stock beneficiaries:

Given the wide-ranging effect of the measures, many domestic-focused stocks are likely to benefit. Some of the key names include: Maruti, M&M, Ashok Leyland, HUL, Britannia, Varun Beverages, Ultratech, JK Cement, Havells, Voltas, Amber, Metro, Trent, LemonTree, Indian Hotels, Niva Bupa, HDFC Life, IGL, Acme Solar, Suzlon, Swiggy, Delhivery, ICICI Bank, HDFC Bank, Bajaj Finance, Shriram Finance.

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