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Informist, Friday, Sept. 5, 2025

MUMBAI – Analysts are bullish on automobile and auto ancillary stocks as such companies are among those expected to benefit from the GST restructuring by the government. With rates across automobile categories slashed, the government also let go of compensation cess on various automobile units in the new GST regime which will be effective from Sept. 22, the first day of Navaratri.    

Late Wednesday, the government announced GST reforms that aim to rationalise the current multi-slab structure into a simpler framework, with two main rates of 5% and 18%, and a larger 40% slab for luxury and sin goods. "Lower GST on entry-level cars, two-wheelers, and three-wheelers should lift demand in price-sensitive segments consequent to price cuts," ICICI Direct said in a report Friday. 

The GST Council reduced tax on small cars, with engines below 1200 cc, to 18% from 28%. It increased GST on mid-sized and big cars to 40% from 28%, while removing the compensation cess. These cars were earlier taxed at 45-50% with cess. Tax on tractors and agricultural machinery was reduced to 5% from 12%. In case of two-wheelers, the GST Council cut the rate to 18% from 28-31% for engines less than or equal to 350 cc. Two-wheelers with more than 350 cc engines will now attract 40% GST, higher than 31% earlier.    

"Most of the OEMs (original equipment manufacturers) we cover, have the potential to raise margins by 100-150 bp (basis points), with a combination of lower discounts, operating leverage and improved mix," Nomura Global Markets Research said. "The suppliers should gain from better volumes and mix, but the impact will be larger on those OEMs with a high exposure to the after-market, as they can raise margins."

Analysts are also bullish on automobile part makers post the GST rejig. "Domestic auto ancillaries are set to benefit through higher OEM demand and better pricing power in replacement," Kotak Securities said in a report on Thursday. "Tyre and battery-makers also gain from better pricing in replacement demand, except Balkrishna Tyres due to higher global exposure, and better profitability through the cycle," the broking firm said. Bearings makers will see limited upside as the GST is already set at 18% for the replacement segment, and there is higher exposure to exports and industrial segment, it said. "By contrast, global ancillaries such as Bharat Forge, Samvardhana Motherson International, and Sona BLW Precision Forgings see marginal gains due to export-heavy exposure and global headwinds".

This week, the Nifty Auto index gained 5.5%, while the Nifty 50 rose at a slower pace of 1.3%. On Friday, the sectoral index closed 1.3% higher at 26320.60 points. All the 15 Nifty Auto constituents closed higher. Mahindra & Mahindra gained the most during the week, followed by Eicher Motors and TVS Motor Co. M&M hit an all time high of INR 3,577.80 on Friday and came off highs to close at INR 3,561.30, up over 2%. 

TOP HEADLINES

* SPOTLIGHT: GST news priced in, further gains in equities hinge on festivals
* SPOTLIGHT: Car, two-wheeler prices may fall up to 8.5% on GST rate rejig
* Bharat Forge arm to buy 950-acre land in Andhra for defence mfg complex
* SVF II Ostrich reduces stake in Ola Electric to 15.68% from 17.83%
* TVS Motor launches NTORQ 150 scooter at introductory price of INR 119,000
* PV despatches down in Aug as cos tweak supply to dealers ahead of GST rejig
* Export reliance, festival sales hope drive 2-wheeler despatches in Aug
* CV despatches in Aug below expectations, tractors benefit from seasonality
* HC directs Delhi govt to quickly release pending EV subsidies to people
* Maruti Suzuki expands presence in mid-sized SUV space with Victoris launch
* Tata Motors launches LPT 812 truck with 5-tn rated payload capacity
* Maruti Suzuki unveils all-new sport utility vehicle Victoris
* Ashok Leyland to invest INR 3 bln-INR 6 bln in 2-3 yrs on EV battery pack unit
* Great Eastern to buy Kamsarmax dry bulk carrier of 81,922 deadweight tonnage
* M&M arm allots shrs to IFC, India Japan Fund on conversion of preference shrs
* Hero MotoCorp Aug total sales to dealerships rise 8% on year, exports surge
* Maruti Suzuki Aug total production dn 6% YoY at 158,202 units, SUVs fall most
* Hyundai Motor India Aug domestic despatches fall, exports continue to grow
* Maruti Suzuki Aug utility vehicle despatches disappoint again but exports up
* Tata Motors Aug despatches growth restricted by slack in domestic PV sales
* M&M's Aug PV despatches contract for first time since January 2022
* Eicher Motor's Royal Enfield despatches zoom 55% YoY in Aug
* Eicher Motors CV despatches grow 9.5% YoY in Aug on higher truck sales
* Ashok Leyland to invest INR 50 bln over 7-10 years for battery localisation
* TVS Motor's automobile despatches hit record high in August
* SC junks PIL seeking direction to govt for non-ethanol blended petrol sale
* Ashok Leyland Aug despatches up 5% YoY; bus sales offset muted truck show
* Bajaj Auto Aug India 2-wheeler despatches down for 3rd month, exports up 25%
* Escorts Kubota Aug tractor despatches up 27% on favourable rural conditions
* ICRA ups outlook on Olectra Greentech's long-term bk facilities to positive
 

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Gopika Balasubramanium

Edited by Avishek Dutta

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