Auto stocks cheer GST reform; M&M shares rally up to 8%

Shares of auto and auto ancillary companies witnessed broad-based buying on Thursday after the Goods and Services Tax (GST) Council approved a major overhaul of the tax structure, reducing the existing four slabs to two — 5% and 18%.

At its September 3 meeting, the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, cut the GST rate on all small cars from 28% to 18%, while retaining the 5% tax rate on electric vehicles.

Boosted by the GST reform, the Nifty Auto index surged as much as 3.7% in the first hour of trade. Among individual stocks, Mahindra & Mahindra rallied nearly 8%, emerging as the top performer in the BSE Sensex pack. In contrast, Maruti Suzuki India , the country’s most valued auto stock, and Ashok Leyland slipped nearly 0.7% each.

Among others, Eicher Motors , Bajaj Auto , and TVS Motor posted solid gains of 1–2%. Hero MotoCorp added 0.9%, while Tata Motors edged higher by 0.6% at the time of reporting.

Auto ancillaries also joined the rally, with Bosch, Tube Investments, Bharat Forge, and Motherson gaining up to 1%. Among tyre makers, Balkrishna Industries and MRF advanced nearly 1%.

According to domestic brokerage Emkay Global, Mahindra & Mahindra is expected to be the biggest beneficiary of the GST cuts, with a 10% reduction across its portfolio. Nearly two-thirds of its lineup will now fall under the 40% slab compared to 50% earlier (with cess), while the rest shifts to 18% from the previous 28% slab.

Maruti Suzuki and Hyundai are also set to benefit, with an estimated 7–8% blended GST cut across their portfolios—around one-third of their models seeing a 3–5% reduction, while the remaining two-thirds enjoy close to a 10% cut, the report noted.

In the two-wheeler segment, Hero MotoCorp, Eicher Motors (Royal Enfield), and TVS Motor are seen as the biggest winners, with around a 10% GST cut across most of their models. Bajaj Auto will also benefit, with nearly half of its portfolio seeing lower taxes, the brokerage highlighted.

Under the new GST slab, bikes below 350cc will attract 18% GST (down from 28%), while bikes above 350cc move to 40%. Despite the higher tax on premium models, Royal Enfield (Eicher Motors) remains a net gainer as the bulk of its portfolio enjoys the rate cut, the report said.

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