Nifty Auto Vs Nifty FMCG Vs Nifty Realty: Consumer Stocks In Focus Amid GST Reform—What Should You Bet On?

Nifty Auto Vs Nifty FMCG Vs Nifty Realty: Consumer-driven companies are poised for gains in the near-term, aided by the government's upcoming next-generation reforms to the Goods and Services Tax (GST), dubbed GST 2.0 that PM Modi as a 'Diwali gift' to citizens. The potential GST rate cuts in the next few months aim to reduce the overall tax burden on consumers and empower small businesses, especially the MSME sector.

From consumer durables, real estate, automobiles, to food products and hospitality, several sectors of the economy are likely to witness a sweeping impact, which will likely drive India's consumption growth, especially during the festive season. The Indian stock market reacted sharply after the GST announcement with the NSE benchmark Nifty 50 reclaiming the 25,000-mark after 24 sessions, which improved the sentiment among investors.

The three-day 364-point rally in the Nifty 50 came in response to the unexpected announcements relating to GST reforms, likely to happen before Diwali. D-Street analysts said the market is responding to the potential demand boost to sectors like automobiles, FMCG, insurance and real estate which are expected to benefit from the GST rate changes.

On Monday, Nifty Auto recorded its biggest intraday gain since June 2024 amid the broad-based sectoral rally aided by the GST rate rationalisation boost. According to Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, investors will focus on the domestic consumption themes in the short-term such as banking, financials, telecom, hotels, healthcare, automobiles and cement, particularly the fairly valued segments.

The automobile sector stands to benefit significantly, with proposed GST cuts from 28% to 18% on two-wheelers with engines under 250cc and passenger vehicles with engines below 1.2L. Tractor GST rates may also be slashed from 12% to 5%. The Nifty Auto index has emerged as a preferred pick for investors this week as the index has gained 1.33%. It is up 7.65% in August so far, 15.35% in six months, and 11.5% on a year-to-date basis.

Additionally, packaged foods, dairy products, juices and coconut water may see GST rates fall from 12% to 5%, enhancing affordability for consumers. This will likely provide a boost to the revenue and margins for the FMCG majors, especially during the festive season. The Nifty FMCG index has gained 2.40% this week and 1.47% in August. The index has gained over 8% in the last six months and is flat-to-negative on a year-to-date basis.

Affordable housing segments are also in focus as taxpayers save more money after the new tax slabs to be able to purchase property. The Nifty Realty index has gained 1.71% this week and nearly 7% in last six months.

Among FMCG names, the top beneficiaries from the GST rate cuts include Britannia, Nestlé, Heritage Foods, Dodla Dairy, Tata Consumer Products, Parag Milk Foods, Bikaji, Gopal Snacks, according to most brokerages.

In the auto pack, global brokerage Morgan Stanley believes Maruti Suzuki India, Mahindra & Mahindra (M&M), Ashok Leyland, and Eicher Motors seem the best placed among the auto majors to reap the benefits of the potential GST cuts.

"Autos fall under the 28% GST bracket. If autos move to 18% and we see sharp price drops, this could drive the next autos upcycle, as seen in 2008," said Morgan Stanley. "There are unknowns, but looking at key factors we note that Maruti, M&M, Ashok Leyland and Eicher seem best placed," it added.

Dinshaw Irani of Helios Capital Management (India) Private Ltd told NDTV Profit in an exclusive interview that domestic two-wheelers will ''definitely benefit' from the GST rate cuts. Financials emerge as the top sectoral pick, according to the D-Street expert.

"Households can expect sizable savings, owing to some higher-ticket consumption items bracketed in the 28% tier," said Motilal Oswal. The restructuring aims to reduce retail prices by 4-5%, providing relief to households while encouraging consumption across key sectors.

According to Sytematix Institutional Equities, construction materials, cement, healthcare, textiles, and renewable energy sectors will also gain from tax cuts, improving margins and competitiveness.

Consumer durable stocks, particularly air conditioners such as Voltas, Havells, Blue Star are among the top picks. UltraTech and JK Cement are among the top picks from the cement sector. Analysts are also betting on apparel stocks such Bata India, Trent, Shopper's Stop, Relaxo, and others.

Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.