GST cuts to lift auto, FMCG, consumer durables earnings by 4-10% next fiscal: Mahesh Patil

Mahesh Patil, Chief Investment Officer at Aditya Birla Sun Life AMC, which manages assets worth nearly $3.21 billion highlighted the positive impact of recent GST and tax measures on corporate earnings.He said, “From a GST rate cut perspective, the sectors which we see could benefit are, one is obviously the auto sector, which has been kind of reeling under pressure… apart from the auto sector, the FMCG sector, where we have seen the rates have been cut from, say, around 12% to 5%… consumer durables, a big cut there, from 28% to 18%.”

Patil added that overall, a meaningful increase in volumes is expected, which should also lead to margin improvements. He noted that some of the sectors mentioned could see earnings upgrades of around 4 to 10% in the next fiscal year.

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Nilesh Shah, Founder and CIO at Envision Capital, emphasised the broader economic tailwinds created by these GST rate changes. He said, “This surely provides tailwinds, both to the economy and to the markets… this is clearly going to be a big booster dose for both the economy as well as the markets going forward.”Consumer appliances are expected to be among the biggest beneficiaries. Shah added that consumer staples, both consumer and consumer discretionary sectors, will gain the most from the GST cut, with a significant portion of the additional savings flowing into consumer appliances.

The insurance sector is also poised for growth following the GST exemption on health and life insurance. Shah explained, “With the GST being removed, it’s quite likely that the entire spending… will entirely go towards the payment of premium… there will be more policy cover, which is good for the sector.”

Both market experts expect the combined impact of GST reductions and tax incentives to stimulate consumption across auto, FMCG, and consumer durables, while supporting higher insurance uptake and overall earnings growth in the coming fiscal year.

For the entire discussion, watch the accompanying video

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