Nifty Auto Vs Nifty FMCG Vs Nifty Realty: Which Consumer Stocks To Bet On Amid GST Reform?

The Indian stock market reacted sharply after the GST announcement with the NSE benchmark Nifty 50 reclaiming the 25,000-mark after 24 sessions, which improved the sentiment among investors. The three-day 364-point rally in the Nifty 50 came in response to the unexpected announcements relating to GST reforms, likely to happen before Diwali.

Impact on Consumer Sectors

From consumer durables, real estate, automobiles, to food products and hospitality, several sectors of the economy are likely to witness a sweeping impact, which will likely drive India’s consumption growth, especially during the festive season. D-Street analysts said the market is responding to the potential demand boost to sectors like automobiles, FMCG, insurance and real estate which are expected to benefit from the GST rate changes.

Nifty Auto: A Preferred Pick for Investors

Nifty Auto recorded its biggest intraday gain since June 2024 amid the broad-based sectoral rally aided by the GST rate rationalisation boost. According to Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, investors will focus on the domestic consumption themes in the short-term such as banking, financials, telecom, hotels, healthcare, automobiles and cement, particularly the fairly valued segments.

The automobile sector stands to benefit significantly, with proposed GST cuts from 28% to 18% on two-wheelers with engines under 250cc and passenger vehicles with engines below 1.2L. Tractor GST rates may also be slashed from 12% to 5%. The Nifty Auto index has emerged as a preferred pick for investors this week as the index has gained 1.33%. It is up 7.65% in August so far, 15.35% in six months, and 11.5% on a year-to-date basis.

Nifty FMCG: A Boost to Revenue and Margins

Additionally, packaged foods, dairy products, juices and coconut water may see GST rates fall from 12% to 5%, enhancing affordability for consumers. This will likely provide a boost to the revenue and margins for the FMCG majors, especially during the festive season. The Nifty FMCG index has gained 2.40% this week and 1.47% in August. The index has gained over 8% in the last six months and is flat-to-negative on a year-to-date basis.

Nifty Realty: Affordable Housing in Focus

Affordable housing segments are also in focus as taxpayers save more money after the new tax slabs to be able to purchase property. The Nifty Realty index has gained 1.71% this week and nearly 7% in last six months.

Top Beneficiaries from GST Rate Cuts

Among FMCG names, the top beneficiaries from the GST rate cuts include Britannia, Nestlé, Heritage Foods, Dodla Dairy, Tata Consumer Products, Parag Milk Foods, Bikaji, Gopal Snacks, according to most brokerages.

In the auto pack, global brokerage Morgan Stanley believes Maruti Suzuki India, Mahindra & Mahindra (M&M), Ashok Leyland, and Eicher Motors seem the best placed among the auto majors to reap the benefits of the potential GST cuts.

Dinshaw Iraniof Helios Capital Management (India) Private Ltd told NDTV Profit in an exclusive interview that domestic two-wheelers will ‘definitely benefit’ from the GST rate cuts. Financials emerge as the top sectoral pick, according to the D-Street expert.

Other Sectors to Benefit from GST Rate Cuts

According to Sytematix Institutional Equities, construction materials, cement, healthcare, textiles, and renewable energy sectors will also gain from tax cuts, improving margins and competitiveness.

Consumer durable stocks, particularly air conditioners such as Voltas, Havells, Blue Star are among the top picks. UltraTech and JK Cement are among the top picks from the cement sector. Analysts are also betting on apparel stocks such as Bata India, Trent, Shopper’s Stop, Relaxo, and others.

Investment Advice

Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.

Investors should focus on the domestic consumption themes in the short-term, particularly the fairly valued segments. The Nifty Auto index has emerged as a preferred pick for investors, while the Nifty FMCG index is expected to gain from the GST rate cuts. Affordable housing segments are also in focus, and taxpayers can expect sizable savings after the new tax slabs.