Demeter's Agarwal sees auto stocks revving up on GST cuts, broader consumption to gain

Ashwini Agarwal, Founder & Partner at Demeter Advisors, said the autos sector could see a near-term rally as the proposed goods and services tax (GST) cuts improve affordability for both entry-level cars and sports utility vehicles (SUVs).

“Autos have been underappreciated as a sector for a while… this might provide a rally for auto stocks in the near term,” Agarwal explained while cautioning that the fine print of the reform is still awaited.

He added that broader consumption-driven stocks also look stronger, supported by benign interest rates, controlled inflation, and structural reforms. Financials, particularly undervalued non-banking financial companies (NBFCs) and nimble public sector undertaking (PSU) banks, stand out as beneficiaries of rising demand and improving credit costs. “If demand picks up, then you should see an improvement in loan growth… and stress on the microfinance sector will decline,” Agarwal said.

Hospitality and airlines, he said, are also positioned to gain from consumption shifts, as capacity lags demand. However, premium hotels may face pressure if GST rates for budget hotels are cut to 5% while luxury properties remain taxed at 40%, potentially forcing five-star hotels to reconsider pricing.

Also Read: Lower GST rates could cover 90% of items, ease compliance: EY adviser

Calling GST simplification a long-overdue move, Agarwal welcomed the reform as a boost to ease of doing business. Staples and entry-level autos, he said, will benefit the most given their price-sensitive demand, while simplification will also mean fewer disputes and compliance issues. The move, he said, is “a very welcome reform” that not only supports consumption but also reduces unnecessary controversies with tax authorities.

For the entire interview, watch the accompanying video

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