By Bharath Rajeswaran and Vivek Kumar M
(Reuters) -Auto and consumer stocks lifted Indian shares on Thursday after the government slashed consumption taxes to revive local demand and cushion the blow from steep U.S. tariffs.
The NSE Nifty 50 was up 0.53% at 24,845.3 and the BSE Sensex gained 0.55% to 81,014.6 as of 10:18 a.m. IST. Both benchmarks had risen over 1% at the open.
On Wednesday, the Goods and Services Tax (GST) council approved a shift to a two-rate structure from the existing four slabs, and said everyday items will face lower taxes starting September 22.
The government estimates the cuts will cause a revenue loss of 480 billion rupees ($5.5 billion), far lower than economists’ estimate of 1 trillion to 1.8 trillion rupees.
“Consumption has been weak for quite some time, so this tax cut is a much needed boost,” said Pramod Gubbi, co-founder at Marcellus Investment Managers.
“The simplification of GST slabs is also a big positive — not just for consumers, but from an administrative perspective. Measures like faster export refunds address long-standing industry complaints, which makes this reform even more meaningful,” Gubbi said.
Analysts said the GST overhaul could add 100-120 basis points to GDP growth over the next four to six quarters.
Ten of the 16 major sectors logged gains. The broader small-caps and mid-caps rose about 0.2% each.
The auto index jumped 2.5% near an 11-month high, while consumer stocks rose 1.7% to a seven-month high.
Mahindra & Mahindra surged 6% and Eicher Motors advanced 3% after tax rates were slashed across automobiles.
“Lower taxes on essentials, consumer products, autos and cement will leave consumers with more money in hand. This should directly boost demand and may even favourably impact next quarter’s earnings,” said Shripal Shal, managing director and CEO at Kotak Securities.
Consumer staples companies such as Britannia, Colgate, Hindustan Unilever, Dabur and Nestle gained 2%-6%.
Tobacco makers ITC and Godfrey Phillips gained about 2% each, despite the GST rate on most tobacco and tobacco products being hiked to 40% from 28%.
The tax rates on tobacco will continue at the current GST rate plus special compensation levy (cess) until the government repays its compensation loans in October, according to ICICI Securities.
(Reporting by Vivek Kumar M and Bharath Rajeswaran; Editing by Sumana Nandy and Sonia Cheema)
