Stock Picks Today: Consumer Goods In Focus After GST Cuts; Voltas, Havells On Brokerages' Radar

Brokerages including CLSA, Jefferies, UBS, Morgan Stanley, Bernstein, and JPMorgan have issued commentary on the GST rate cut, highlighting a positive outlook for consumption-driven sectors. This shift in policy focus is seen as a key catalyst for the market, with potential gains for a wide range of companies.

• CLSA India Strategy believes the GST cuts, in combination with earlier income tax and interest rate reductions, will significantly boost consumption, potentially adding 30 bps to GDP. It notes a strengthened case for consumption stocks over capital expenditure plays. The firm identifies direct beneficiaries across autos, FMCG, durables, cement, insurance, QSR, and alcohol players.

• Bernstein views the reforms as a clear signal of the government's commitment to boosting consumption. The brokerage estimates a fiscal deficit impact of around 20 basis points if no capex adjustments are made. It remains underweight on government capex and industrials, as policy attention shifts to consumption.

Automobiles

CLSA and JPMorgan are both positive on the auto sector, viewing the GST cut as a broad-based boost to demand.

• CLSA sees Maruti Suzuki as the top beneficiary in passenger vehicles, with Hyundai Motor India and Mahindra also gaining. In the two-wheeler space, Hero MotoCorp, Bajaj Auto, and TVS Motors are expected to benefit equally, as is Royal Enfield due to its focus on the sub-350cc segment.

• JPMorgan notes that the GST cut will benefit Mahindra's larger SUVs and tractors, and Eicher's domestic portfolio. It also highlights that while Maruti and Hero Moto will benefit from the revival of the first-time buyer segment, the upside could be capped as premium segments also see a GST cut.

Insurance

Brokerages have a cautious but overall "manageable" view on the insurance sector.

• UBS and CLSA both note that the lack of input tax credit could lead to a GST liability on expenses, potentially necessitating price hikes of 1-4% to protect profitability.

• Jefferies sees the GST exemption on life and health insurance premiums as having a "manageable impact" and believes the potential for increased sales of high-margin protection and riders can help offset any negative effects.

FMCG

• Goldman Sachs and UBS believe the GST cut will be a positive catalyst for the FMCG sector. They foresee an overall boost to consumption, a potential shift from unbranded to branded products, and accelerated volume growth.

• Morgan Stanley and UBS see clear beneficiaries, with Britannia, Nestle, Dabur, Colgate, and Hindustan Unilever (HUL) highlighted as stocks poised for gains.

• Jefferies is awaiting clarity on the compensation cess for ITC, which could be a key factor for the stock.

Electronic Manufacturing Services (EMS): Macquarie sees a US$1 trillion opportunity by 2035 and initiated an Outperform rating on Kaynes, Avalon, Syrma SGS, Dixon, and Amber, while giving a Neutral rating on Cyient DLM.

Quick Commerce: UBS and CLSA view a recent increase in platform fees as a positive step for monetization for Eternal and Swiggy, with minimal expected impact on order volume.

Cement and Consumer Durables: UBS views the GST changes as "sentimentally positive" for Cement, and a direct positive for consumer durable companies like Voltas and Havells, as it boosts affordability.

Telecom: Citi maintains a Buy rating on Indus Towers, highlighting attractive valuations and strong free cash flow, and notes that its planned expansion into Africa could be debt-funded, leaving Indian cash flows available for distribution.

Aviation: JPMorgan and HSBC maintain a Buy rating on InterGlobe Aviation, citing the company's long-term investments in a new MRO facility and a larger owned fleet, which are expected to lead to cost savings.

Pharma: Nuvama initiated a Buy rating on Neuland Labs, with a target price of Rs 17,700, citing promising growth in its Contract Manufacturing Solutions and new Unit III expansion.