Maruti, M&M, Hero Moto, Tata Among SEBI Analyst’s Top Picks As Lower GST Comes Into Effect

India’s auto sector drew attention on Monday as GST 2.0 came into effect, marking the most significant change in tax rules since the Goods and Services Tax was first introduced. 

The reform has simplified the tax structure for passenger vehicles, bringing relief to car buyers across the country.

MRF, Bajaj Auto and Hero Motocorp shares led with gains of nearly 2% on Monday.  

GST Changes For Automobiles

Under the new framework, most small cars, two-wheelers up to 350cc, three-wheelers, buses, trucks and auto parts are now taxed at 18% compared with 28% earlier. Big cars, luxury vehicles and SUVs will continue to fall in the higher 40% tax bracket.

Most automakers have already reduced prices by rolling back the benefit. Tata Motors has cut vehicle prices by up to ₹1.55 lakh, while Royal Enfield has made its popular 350cc range up to ₹22,000 cheaper. Maruti too slashed prices on entry-level cars, with S-Presso seeing the sharpest cut of up to ₹1.3 lakhs.

Sector Impact

SEBI-registered investment advisor Nidhi Saxena of The Trade Bond added that the lower prices are expected to boost demand, especially in rural and semi-urban markets where entry-level and mid-segment vehicles will become more affordable. 

She added that dealers should benefit from faster inventory clearance and festive bookings.

According to her, margins are likely to be neutral to positive since lower tax incidence will ease some cost pressures. However, luxury and premium automakers may see limited benefit since their products remain in the higher tax bracket.

Auto Stocks To Watch

Saxena pointed to several names that stand to gain the most from the GST 2.0 changes. Mahindra & Mahindra could benefit due to its SUV and tractor presence in rural India. Maruti Suzuki remains a strong volume play thanks to cuts across small and mid-sized cars. 

Tata Motors has passed on the full benefit with its price cuts. Atul Auto and other three-wheeler manufacturers could see significant upside from the lower tax rate. 

Among two-wheelers, Hero MotoCorp, Bajaj Auto, and TVS Motor may get a boost from stronger rural demand.

Analyst View

Saxena said the reform is a structural positive for the auto industry. She said players with significant rural exposure in the mass market category, such as M&M, Maruti and some two-wheeler companies are best placed to gain from this. 

However, she cautioned that risks remain in the form of input costs, interest rates and financing conditions.

Saxena said she is moderately bullish on autos for the next 6–12 months, with maximum opportunity likely in value and volume segments.

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