The Indian economy received a much expected boost in the form of streamlining the Goods and Services Tax (GST). The move pares down the current 4-slab structure of 5%, 12%, 18% and 28% to just 2 rates - 5% and 18%. Announced by finance minister Nirmala Sitharaman, these cuts are expected to lower inflation and revive domestic consumption for hundreds of consumer items.
For a market still grappling with the negative fallout from the imposition of 50% tariffs by the United States of America, the news of GST rationalisation had an immediate positive impact. Both Sensex and NIFTY50 recorded significant gains in today’s morning session, before settling down by the closing bell.
In terms of long-term impact on stock markets, consumption-driven sectors like auto, fast moving consumer goods (FMCG), consumer durables, travel, etc. are expected to see improved retail demand. This, in turn, can translate to higher revenues over the next few quarters. Whether these gains will reflect in their share prices will depend on how effectively they are able to transfer these tax benefits to the end consumer.
Which are the sectors or stocks that you think will benefit most from this decision? Do share your thoughts with us in the comments section below.