Following the government’s GST rationalisation, the automobile and consumer durables sectors have emerged as the biggest beneficiaries, with expectations that rate cuts could revive sales that have remained stalled in recent quarters amid weak urban demand.
Stocks from both sectors have witnessed strong gains, providing significant support to the Indian stock market, which has remained buoyant since the rollout of the new consumption tax rates on September 3. The move lowered tax slabs on several consumer durables and automobiles, boosting investor sentiment and creating optimism for a consumption-led recovery.
However, the market movement remained restrained due to higher US tariffs, overshadowing the domestic positive factors and curbing investor enthusiasm despite supportive measures like the GST rate cut.
Nevertheless, looking ahead, analysts remain upbeat on the potential for a second leg of the rally in these counters after September 22, when the new rates are expected to kick in. This, coupled with festive buying, is likely to lead to a sharp rise in consumer demand.
Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said, “The Indian macro picture remains robust. Financial stability, as reflected in fixed deposit (FD) and current account deficit (CAD) numbers, strong GDP growth prospects, and falling inflation, are positive indicators. After September 22, the sharp rise in demand for consumer durables, particularly automobiles, will dominate economic and business news. This, in turn, will provide positive sentimental support to the market.”
Apart from the GST rate cut optimism, if the trade talks between India and the US show progress following the decision by both countries to continue negotiations, it will also remove a major concern for the market and boost sentiment.
Structural boost for consumer durables and auto sectors as GST rates fall
The GST rates have been reduced from 28% to 18% for consumer electronic goods, with analysts expecting this to result in price cuts of 7–8% across the board and boost air conditioner volume growth by 9–10%, assuming the benefit is passed on to the end customer.
Within the consumer durables space, air-conditioners, televisions of 32 inches and above, and dishwashers are likely to enjoy the lower GST rate of 18%, compared with 28% earlier, while LED lights, fixtures, and energy-efficient lighting will now fall within the 5% slab versus 12% previously.
For automobiles too, the rates have been slashed to 18% for mass-market categories, with analysts viewing this rationalization as structurally positive for the auto sector, easing affordability pressures and supporting demand recovery.
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