Rs 6 lakh crore boom in 1 month! How PM Modi’s GST cuts shook the stock market

With investors scrambling to realign portfolios around India’s consumption revival story, auto and consumption-related stocks have emerged as the biggest winners one month after Prime Minister Narendra Modi announced GST rationalization on August 14, leading a spectacular Rs 6 lakh crore rally.

The Nifty Auto index has surged over 11% in the past month, with the combined market capitalization of its 16 stocks exploding by Rs 5.13 lakh crore. Royal Enfield-maker Eicher Motors emerged as the biggest winner with a blistering 19% gain, while India’s largest carmaker Maruti Suzuki rocketed 18% higher.

Under the new GST rules, which comes into effect from September 22, small cars will now attract 18% GST vs 28-31% earlier, while large SUVs will be taxed at 40% vs 43-50% earlier. Similarly, GST on two-wheelers below 350 cc will now attract 18% GST instead of 28%.

The consumer durables sector joined the party with equal fervor, as the Nifty Consumer Durables index jumped 5.6%, adding over Rs 78,000 crore in market value. Shares of footwear Bata India led the charge with a stunning 20% surge. GST on footwear priced below Rs 2,500 will fall down to 5%.

“GST 2.0, with an estimated net revenue reduction of Rs 48,000 crore for the government, is set to act as a fiscal stimulus. Based on 2x multiplier, this could release Rs 96,000 crore of incremental demand into the economy,” analysts at Elara Securities noted.
What appears as a fiscal sacrifice on the government’s balance sheet is translating into a growth catalyst that could reshape consumption patterns across India.
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The euphoria isn’t just theoretical. Seshadri Sen from Emkay Global, after meeting nine corporates across consumption and BFSI, revealed the ground reality: “There is widespread optimism about a 2H recovery with focus on the economy segments, for which GST impact on affordability is more pronounced.”

The impact is visceral and immediate. “Companies expect 8-10% delta in sales volume, with a bigger impact on the economy segments. The affordability impact is much higher for lower-income segments,” Sen added, maintaining Emkay’s aggressive Nifty target of 28,000 for September 2026.

TVS Motor, Hero MotoCorp, Samvardhana Motherson, Exide Industries and Ashok Leyland have all posted double-digit returns in the last one month as investors bet on sustained consumption recovery.

In consumer durables, the rally extended beyond Bata to PG Electroplast, Amber Enterprises, Century Plyboards, Dixon Technologies and Voltas – each benefiting from the affordability boost the GST cuts promise.

Analysts emphasize this isn’t a flash in the pan. “The GST cuts are one of the many drivers of the expected consumption recovery. They ride on previous government actions like the ~Rs 1 trillion tax cuts in the FY26 Union Budget and the RBI’s monetary easing,” Sen explained.

Most corporates view this as permanent TAM expansion, estimating the affordability gap contracts by over 50%.

The Lollapalooza Effect

ICICI Securities’ Vinod Karki sees something even bigger brewing: “Lollapalooza effect on aggregate demand likely as rate cuts in GST, income tax and interest on loans work simultaneously through the economy along with rising government spending, banking liquidity surplus and continued pro-growth policy making.”

This could provide “growth surprise on the upside, leading to an upgrade to the 6.5% growth projection by the RBI,” Karki added.

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Domestic brokerage firm Mirae Asset Sharekhan has turned decisively bullish, upgrading the consumer goods sector from Neutral to Positive. “We believe Britannia, Nestlé, Colgate, HUL, Emami and Dabur to be key beneficiaries of GST rate cuts,” with preferred picks including HUL, Dabur, Britannia, Colgate, Radico Khaitan and Allied Blenders & Distillers.

Elara Securities sees discretionary spending dominating the incremental flows, with “fashion, food services (QSR and online food delivery), lifestyle, and electronics” emerging as the biggest beneficiaries. QSR chains and online beauty platform Nykaa could see outsized gains.

However, not everyone is drunk on the euphoria. Kotak Institutional Equities strikes a cautious note on autos: “It is obvious that volumes of all players are not going to be 15-20% higher in perpetuity and profitability may not increase significantly with 4W companies passing the full benefit of GST cuts through price reductions.”

For consumer durables, they see “moderate increase in volumes, but limited impact on profitability given the competitive nature of the industry,” noting that air conditioners may not see much demand boost given the approaching winter season.

What’s unfolding is more than just a market rally – it’s a fundamental reset of India’s consumption trajectory. With Rs 1 lakh crore of incremental demand potentially flooding the economy, the GST rationalization announced on Independence Day may have triggered the most significant consumption boom in recent memory.

(Data: Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)