Welcome to yet another edition, chief!

In today’s edition — The GST 2.0 move has set off a ₹6 lakh crore market rally, but the gains aren’t evenly spread. Autos and consumer durables are on a high, dining on delectables brought forth by GST cuts, while insurers are whining because it’s going to affect their profit margins. We look at how the new normal in taxation is reshaping India’s consumption story in uneven ways.

Unequal Impact of GST Cuts

Vishwas Ved

If you follow India’s stock market, you probably know it already that in just a month, its value has increased by nearly ₹6 lakh crore, thanks to the recent GST cuts.

Let’s put the number in perspective: that was the size of Sri Lanka’s entire economy in 2023. The gains have been led primarily by auto and consumer durable stocks, and their investors have been rewarded handsomely.

The Nifty auto index has risen about 11%, and the market cap of the sector has grown by about ₹5 lakh crore. The key contributors are Eicher Motors and Maruti Suzuki, which have gained 20% each.

This is because small cars, which attracted GST rates up to 31%, are now taxed at 18%. Two-wheelers under 350cc are also in the same slab, which has made them significantly affordable. That’s a big deal for a price-sensitive market like India.

Likewise, consumer durables are also flying high. The Nifty Consumer Durables index rose 5.6% during the same period, adding about ₹78,000 crore in value. 

Bata India stock jumped 20% after GST on footwear under ₹2,500 was cut to 5%. Other companies like Dixon, Amber Enterprises, and Voltas also gained as their products – TVs and ACs – became more affordable.

All in all, there is a great post-GST party going on in the market. But the dampener is that many are not invited to it. 

One of them is insurance where no GST will be charged on life and health cover premiums. This change has been welcomed by policyholders. The industry, on the other hand, is whining that the tax cut will eat into its profits.

They are not entirely wrong. Insurers have lost the input-tax credit on expenses such as office rent, IT services, and agent commissions. The fear is that this denial of credit could push up their costs by 5-6%.

On top of that, the government has told insurers – whether they like it or not – that they must fully pass on the GST cut benefit to the policyholders. 

The industry is naturally worried it may have to absorb extra costs to stay compliant with the government directives. As a result, the whole sector has seen a mild decline in stock prices. 

That’s not all. Some experts warn that things may not play out as smoothly for the “winner” camp either. 

According to them, higher sales volumes may not necessarily translate into more profits, especially when they intend to pass the entire GST cut benefit to customers, leaving little room to expand margins. 

And then there are some fiscal worries as well. By cutting taxes, the government is giving up around ₹48,000 crore in revenue. The idea, of course, is that these short-term losses will somehow get offset by a rise in demand. 

If it works, we’re looking at the possibility of more people becoming consumers of cars, durables, and branded goods. 

However, if it doesn’t play out that way, the state simply ends up with a hole in its finances, leading to several long-term fiscal problems. 

Final Words

GST 2.0 has shaken things up in a big way. Autos and durables are laughing all the way to the bank,  and investors are loving the consumption story.

But insurance is wobbling, and even the so-called winners may discover their profits won't be as shiny as the rally suggests.

That’s the uneven reality of a reform as big as this one. It has lifted some boats higher than others. And with the government betting big on demand to carry the economy forward, the stakes are even higher this time. 

For now, the stock market is having fun, but the real test will come when companies start reporting numbers in the coming quarters. 

Until then, it sure is an interesting ride.

$3 Trillion

Alphabet has joined the $3 trillion market cap club. Shares of the search giant soared this week, pushing the company into territory occupied only by Nvidia, Microsoft, and Apple. The stock got a big lift in early September from an antitrust ruling by a judge, whose penalties came in lighter than shareholders feared. The US Department of Justice wanted Google to be forced to divest its Chrome browser, and last year a district court ruled that the company held an illegal monopoly in search and related advertising.

– China bans Nvidia’s AI chips. China’s internet regulator has banned the country’s biggest technology companies from buying Nvidia’s artificial intelligence chips, as Beijing steps up efforts to boost its domestic industry and compete with the US. The Cyberspace Administration of China (CAC) told companies, including ByteDance and Alibaba, this week to end their testing and orders of the RTX Pro 6000D, Nvidia’s tailor-made product for the country, according to three people with knowledge of the matter.

– Pre-booked security check slots at airports. Adani Airport Holdings, which manages seven airports in the country, is planning a trial of a system that will let fliers pre-book security checkpoint slots, a first-of-a-kind in the country. If implemented, the service will allow fliers to  book security screening slots in advance, helping cut down wait times in long queues. Globally, multiple airports such as Amsterdam Airport Schiphol in the Netherlands, London’s Heathrow Airport, Los Angeles International Airport among others offer a similar service currently.

– Groww files papers for ₹7,000-crore IPO. Billionbrains Garage Ventures, the parent company of the investment platform Groww, filed its updated draft red herring prospectus with Sebi for an IPO worth ₹7,000 crore. The offer includes a fresh issuance of shares worth up to ₹1,060 crore and an offer for sale (OFS) of up to 574.2 million shares by existing investors and promoters. Promoters Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal will each sell up to 1 million shares. 

– Trump advocates end to quarterly earnings reports. US President Donald Trump this week floated the idea of companies no longer providing earnings reports on a quarterly basis and switching to semiannual instead. The US Securities and Exchange Commission has said it is actively looking into that plan. Trump had initially raised the idea in a Truth Social post, saying it is “subject to SEC approval” and would “save money, and allow managers to focus on properly running their companies”.

ICYMI | CFOs: The New Optimus Prime

Missed last week's update? Today’s CFOs are constantly stepping into new roles and donning new hats — much like Optimus Prime, the Transformer who changes shapes to save the day. The finance chiefs are no longer only numbers guys. They manage risks, fix crises, and reinvent themselves as new assets to ensure businesses are steady, growing, and well-prepared for whatever comes next.

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