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Informist, Thursday, Sept. 4, 2025

 

By Anshul Choudhary

 

MUMBAI – Analysts said equities have priced in the goods and services tax cuts as most of it was known to market participants who had already bought consumption-related stocks in the run-up to the 56th GST Council meeting. Going forward, these stocks are unlikely to see major gains until the GST cuts translate into higher volumes during the festival season.

 

The Nifty 50 rose as much as over 1% Thursday, nearly touching 25000 points after the government announced the GST rejig late Wednesday. However, investors chose to take profits towards the close of the session and the 50-stock index lost most of its intraday gains to end nearly flat at 24734.30 points.

 

Investors' sell-on-rise tactic was more clearly visible in the small-cap and mid-cap spaces. The Nifty Smallcap 250 and Nifty Midcap 250 indices were up as much as 1?ch intraday but ended around 0.6-0.7% lower--a fall of nearly 2% from the intraday highs.

 

Analysts said investors took profits Thursday as several consumption-related stocks had already risen after Prime Minister Narendra Modi announced the plan to reduce GST rates in his Independence Day speech on Aug. 15. While the GST cuts, along with the income-tax rebate announced in the Union Budget for the financial year 2025-26 (Apr-Mar), are expected to boost consumption, several analysts covering consumption-related companies said they will wait and assess festival season demand before revisiting their earnings estimates.

 

Technical analysts said the Nifty 50 index is still expected to face resistance at 25000 points. The index is expected to move towards its lifetime high of 26277.35 points--last touched in September 2024--only if earnings growth improves or foreign investors turn net buyers. For now, analysts do not expect any major fall in the Nifty 50 as hopes of better earnings growth are still alive due to the latest GST cuts, the tax benefits announced in the Budget, and rate cuts effected by the Reserve Bank of India.

 

"The GST cuts are very good for consumption... it was important as our exports could be impacted due to tariffs (by the US)," Joseph Thomas, head of research at Emkay Wealth Management, said. "Consumption is expected to improve in the medium term, i.e. beyond 3-6 months."

 

ANTICIPATORY GAINS
Even before the announcement of changes in the GST structure was made late Wednesday, the sectoral Nifty Auto index had risen nearly 7% since Modi's speech. The index saw another 1% gain Thursday after the announcement. This was largely due to the surprise removal of compensation cess for mid-sized and bigger cars.

 

For small cars, the GST cut to 18% from 28?rlier was on expected lines. This pushed market participants to take profits in shares of Maruti Suzuki India Ltd, which fell nearly 2% Thursday. Before the GST decision, shares of Maruti Suzuki had risen over 15% since Modi's speech.

 

Shares of fast-moving consumer goods companies had risen in the past two weeks, but gains were largely muted Thursday. Before the announcement, the Nifty FMCG index had risen 4.5% since Modi's announcement. The sectoral index rose only 0.2% Thursday as there was no major surprise in the final decision of the GST Council.

 

Nestle India Ltd. was among the top gainers in the FMCG sector in anticipation of cuts in GST on food products. The stock has risen over 11% since Modi's speech. Most of these gains had come before Wednesday's final decision. Shares of Nestle India rose as much as 4% Thursday before losing steam and ending just over 1% higher.

 

FMCG companies are facing a larger issue of muted volume growth and the GST cuts are unlikely to push consumers to buy their products, analysts said. "You are not going to see supernormal growth in volumes," an analyst covering the sector said. Several analysts highlighted that products on which a lower GST rate will now apply are items of daily use and may not see a surge in demand simply because prices are lower. "You won't buy more biscuits and soaps simply because it's cheaper," the FMCG analyst said. Concerns around growth in volumes, therefore, are likely to keep gains in check for FMCG stocks.

 

Shares of consumer durables companies, especially those manufacturing air conditioners, were expected to benefit from lower tax. As expected, the GST Council lowered tax on air conditioners to 18% from 28%. It also lowered GST on dish-washing machines and television sets larger than 32 inches to 18%. Market participants mostly took profits at higher levels in consumer durable companies with the Nifty Consumer Durables index seeing only marginal gain Thursday. Until Wednesday, the index had gained 6.6% since Aug. 15.

 

Shares of Blue Star and Dixon Technologies were the top gainers among consumer durable companies in the past two weeks, each rising nearly 10% since Independence Day. However, investors largely stayed away from these stocks once the GST Council made its decision. Shares of Blue Star ended nearly 1% lower Thursday while Dixon Technologies rose only 0.5%.  End

 

With inputs from Simran Rede

Edited by Nishant Maher

 

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