Auto stocks in demand after passage of GST bill in Rajya Sabha

Seven auto stocks rose by 0.66% to 3.78% at 11:37 IST on BSE on expectations that auto manufacturers may benefit from the Goods and Services Tax constitutional amendment bill passed by the Rajya Sabha yesterday, 3 August 2016.

Tata Motors (up 3.78%), Bajaj Auto (up 1.96%), Hero MotoCorp (up 1.82%), Ashok Leyland (up 1.22%), Maruti Suzuki (India) (up 0.95%), TVS Motor Company (up 0.74%) and Escorts (up 0.66%), edged higher. Eicher Motors (down 0.24%) and Mahindra & Mahindra (down 0.54%), edged lower.

The S&P BSE Auto index was up 1.52% at 21,043.34. It outperformed the S&P BSE Sensex, which was up 0.28% at Rs 27,773.70.

The S&P BSE Auto index had outperformed the market over the past one month till 3 August 2016, rising 4.78% compared with 2.04% rise in the Sensex. The index had also outperformed the market in past one quarter, rising 12.43% as against Sensex's 9.78% rise.

According to reports, on-road price of vehicles could drop by 8% once a nationwide Goods and Services Tax (GST) kicks off. Lower prices can be construed as indirect stimulus to boost auto sales volumes. The Rajya Sabha yesterday, 3 August 2016, passed the Goods and Services Tax (GST) constitutional amendment bill that will help usher in a nationwide goods and services tax. Since the government made amendments to the GST constitutional amendment bill originally passed by the Lok Sabha, the bill will again go to Lok Sabha for its ratification. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs. The passage of the constitutional amendment bill kicks off a legislative marathon in which both the Union and State parliaments will need to pass further laws setting the rate and scope of the GST. The standard GST rate, which will apply to most goods and services under the GST regime, will be worked out by the GST Council, comprising representatives of the states and the Centre that will set up in due course.

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