GST reforms: How and where to invest in the stock market? Analysts decode

At the bourses, the consumption-driven theme has played out well thus far in FY26 with the Nifty India Consumption index rising nearly 11 per cent as compared to around 5 per cent rise in Nifty 50

The proposed rejig in goods and services tax (GST) announced by the government last week coupled with eights pay commission dole out is likely to push consumption-driven stocks such as air conditioners (ACs), select automobiles, fast moving consumer goods (FMCG), retail and counters of quick service restaurants (QSRs) into higher orbit over the next few months, believe analysts. 

 

In this backdrop, they suggest investors stay with the ‘consumption’ theme rather than ‘capex-driven’ plays over the next few months. 

 

At the bourses, the consumption-driven theme has played out well thus far in fiscal 2025-26 (FY26) with the Nifty India Consumption index rising nearly 11 per cent as compared to around 5 per cent upswing in the Nifty 50 index during this period.

 

Here’s how leading brokerages have decoded the GST rejig-related developments and their investment strategy in this backdrop. 

 

Bernstein

 

Despite good monsoons and green shoots in rural areas, a broad based consumption recovery awaits. An optimistic case of this measure results in a net annual consumption boost by $13 billion, assuming 65 per cent of incentive comes back as consumption.

 

Equity markets will cheer this fiscal push - although a part of this flow will emerge from truncated capex. However, a recovery demand in the economy to eventually push private spending is the argument in the medium term. As for Nifty - despite near term economic weakness and tariff uncertainty we continue to expect a high single-digit return for the rest of the year. 

 

From a sector perspective we retain our consumer over Industrials focus this year. We moved to overweight on consumer staples last month, had upgraded durables earlier this year and have been selectively picking other discretionary areas for our India portfolio (select retail, QSRs). 

GST rate cut impact

 

Jefferies

 

Likely beneficiaries may include currently 28 per cent taxed goods such as two-wheelers (Bajaj, Hero, TVS, Eicher should benefit), ACs (Voltas, Blue Star, Amber Enterprises. Marginal positive for Whirlpool, Havells, Lloyd) and possibly small cars and hybrids.

 

Cement is another large category at 28 per cent, which stands to benefit. The removal of the 12 per cent tax bracket will be positive for processed foods, footwear (less than Rs 1,000), hotels (less than Rs 7,500), garments (over Rs 1,000), and farm equipment. Relief in headline tax rates for Insurance premium is also likely. Lower tax on cement & some other construction material is positive for developer margins.

 

The festive season shopping will start from mid-September. The implementation of GST rate changes on consumer durables needs to be timed accordingly, or there is a risk of delay. The GST rate cut will also have some dampening impact on the CPI well into the first half of FY26 and may raise hopes of further rate cuts by the RBI.

 

Emkay Global

 

The sector rotation theme of consumption over capex will see further traction. However, the net impact on aggregate demand will hinge on how the government offsets the resulting revenue loss. If fiscal targets are to be maintained, this gap is likely to be bridged by reducing other expenditures—whether in capex, or revenue expenditure outlays in the social sector and rural schemes—limiting the overall lift to demand. However, all else equal, such tax changes should boost consumption in FMCG, consumer durables, autos, cement, and similar sectors, with even the Insurance sector seeing a gain.

 

Motilal Oswal Financial Services

 

Key segments/sectors that stand to benefit include Consumer Staples (through better demand, lower raw material costs), Automobiles (four-wheelers), Cement, Hotels (sub Rs 7,500 room rate inventory), Retail (footwear), Consumer durables, Logistics, Quick Commerce. Some of the key stock beneficiaries include Hindustan Unilever, Britannia, Maruti, Ashok Leyland, Ultratech, Voltas, Amber, Delhivery, LemonTree, Swiggy, HDFC Bank, and Bajaj Finance.

 

ICICI Securities

 

Among stocks, select packaged foods Nestle, HUL, Tata Consumer, AWL Agri and Patanjali are likely to benefit from the rejig. GST rejig on ayurvedic products (chyawanprash, ethnic and OTC products) is likely to benefit Dabur, Emami. Dabur, Varun Beverages could gain from rejig in GST rates for fruit juices. In discretionary items, Go Fashion, Vishal Mega Mart, Page Industries are likely to gain.

 

Blue Star, Voltas, Havells (Lloyd), Whirlpool could benefit in the white goods and durables categories. Hatsun, Dodla, Heritage in the dairy segment, and Maruti Suzuki, Hero MotoCorp and Mahindra & Mahindra are expected to be the key beneficiaries.