Auto stocks drive ₹3 trillion market capitalisation surge on GST cut

Tax cuts drive auto stocks higher as Maruti, Eicher, and TVS surge; analysts expect festival season demand to lift sales and profits across India's automobile sector

Indian automakers have emerged as the biggest beneficiaries of the government’s move to slash consumption taxes with expectations of stronger demand lifting their profit outlook.

 

The Nifty Auto index, which tracks 15 auto firms, has added nearly ₹3 trillion ($34 billion) in market capitalisation since August 15, when Prime Minister Narendra Modi first announced the government’s plan to lower goods and services tax (GST) in the steepest reduction in a decade.

 

The index has jumped 12.7 per cent since then, far outpacing the 1 per cent gain in the broader Nifty 50 during the same period. Overall market sentiment was dampened by the imposition of a 50 per cent tariff on India’s exports to the US — the highest in Asia.

 

On Tuesday, the Nifty Auto index closed largely flat at 27,183. 

 

Earlier this month, the GST council finalised the proposals that will see lower taxes on most items of everyday use. The government cut the GST to 18 per cent on most passenger vehicle categories, from as high as 31 per cent, making cars and bikes more affordable for millions ahead of India's crucial festival season next month that drives about a quarter of annual auto sales.

 

Maruti Suzuki India, the country’s biggest automaker by market value, has surged 19 per cent since August 14. Two-wheeler makers like Eicher Motors and TVS Motors have also been among the top performers in the auto index.

 

“Exciting times lie ahead for the auto sector,” said ICICI Securities analyst Shashank Kanodia, who sees demand boost for price-sensitive segments such as entry-level cars, as automakers start lowering prices following the tax cuts.