NEW DELHI: India's equity market staged a sharp rally on Monday, with investors piling into auto and consumer goods stocks amid rising hopes of GST reforms. The Nifty Auto and Consumer Durables indices jumped 4% and 3%, respectively, driven by heavyweights such as Maruti Suzuki, Hero MotoCorp, and Voltas, which advanced between 6% and 9%.
Reports suggest that the GST Council is considering a significant overhaul of the current structure, moving from four tax slabs to a simplified two-rate system: 5% for essential items and 18% for most other goods. Luxury and sin products are likely to face a steeper levy of around 40%.
The BSE Sensex surged 676.09 points, or 0.84%, to close at 81,273.75, while the NSE Nifty gained 245.65 points, or 1%, to settle at 24,876.95. Market breadth was firmly in favour of the bulls, with 1,729 stocks advancing and 837 declining, reflecting strong overall sentiment in the broader market.
The sentiment was also boosted by S&P’s upgrade of India’s sovereign credit rating to 'BBB' from 'BBB-', marking the first such improvement in 18 years. The agency also raised the ratings of ten Indian financial institutions, citing strong growth prospects, which fuelled optimism in banking and financial stocks.
Additionally, hopes of a potential rollback of the additional 25% US tariff on India amid encouraging progress in US-Russia peace talks, supported investor confidence.
Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services said that a combination of policy reforms (GST 2.0), sovereign rating upgrade, potential tariff relief, RBI and government stimulus, monsoon-led consumption revival and festive demand could trigger a strong recovery in the corporate earnings in 2HFY26.
"Thus, we maintain a positive view on Indian equities over the next 6-9 months," stated Khemka.
Vinod Nair, Head of Research, Geojit Investments said that the proposed rationalisation of GST is a sentiment booster for the domestic market and the recent conclusion of the US and Russia summit, without any escalation in geopolitical tensions, has helped ease investor anxiety.
"The automobile sector outperformed, emerging as a key beneficiary of the anticipated tax reforms. In H2FY26, we expect the consumption-led sectors to show some traction on account of demand revival," added Nair.
The government has indicated targeted relief measures, including lowering GST on small petrol and diesel cars from 28% to 18% and cutting or even removing GST on life and health insurance premiums.
Among the auto stocks, Maruti Suzuki surged 9% on Monday to close at 14,090.
Brokerage firms such as Morgan Stanley and Nomura have highlighted Maruti to be one of the beneficiary in case the GST rates on passenger cars are revised lower.
Hyundai Motor India gained more than 9% and hit a 52-week high of Rs 2,464.70 during the trading session. Ashok Leyland gained 8%, TVS Motor surged 6.5% and Hero MotoCorp advanced 6%.
At present, vehicles are taxed under multiple slabs combining GST and cess. As per reports, the government is weighing a flat 18% levy on mass-market vehicles. This is expected to benefit two-wheelers whose engine size is below 350cc and small cars up to 1,200cc which currently attract 28% GST. Luxury cars and sports utility fall under the higher 40% bracket.
Consumer durables stocks, including shares of refrigerator and air-conditioner manufacturers, rallied up to 8% on expectations that they would fall in the lower GST slabs. Shares of Bluestar and Voltas gained 7% and 6% respectively.