GST reforms rewrote the auto stock map: Who won, who lost and where can investors still make money?

The GST rate cut has triggered a sharp rally across auto and auto-ancillary stocks, with analysts pointing to valuation re-rating, margin expansion, stronger demand and replacement cycles as key drivers.

Prime Minister Narendra Modi announced the government's plan for next-generation GST reforms during his Independence Day address on August 15, 2025. The revised GST rates for the automobile sector were subsequently implemented from September 22, 2025.

Among the stocks tracked, Sona BLW Precision Forgings emerged as the biggest gainer, rising 77.05%. Samvardhana Motherson International followed with a 74.01% gain, while Bharat Forge advanced 67.81%.


Bajaj Auto gained 45.13%, TVS Motor Company rose 39.06% and Ashok Leyland advanced 38.86%. Eicher Motors gained 33.41%, Bosch rose 21.81%, Exide Industries increased 12.97%, Hero MotoCorp gained 12.75% and UNO Minda rose 10.37%.

The laggards included Mahindra & Mahindra, which declined 3.53%, Maruti Suzuki India, down 0.61%, and Tube Investments of India, which fell 10.71%.

Tata Motors, meanwhile, has advanced 16% in terms of market capitalisation. The company went through a demerger last year. The combined market capitalisation of Tata Motors' passenger vehicle and commercial vehicle segments changed from ₹244,686.47 crore to ₹284,439.32 crore, representing a 16% increase.

Subhash Gate, Senior Research Associate (Auto and Auto Ancillaries) at Choice Institutional Equities, said the rally across his coverage of Bajaj Auto, TVS Motor and Ashok Leyland has run ahead of earnings.

"Across our coverage — Bajaj Auto (Target Price: 11,700, with ADD rating), TVS Motor (Target Price: 4,250, with ADD rating) and Ashok Leyland (Target Price: 195, with BUY rating) — the rally has run ahead of earnings.

"FY26-29E EPS CAGR for the three is 12-21%, but stock prices are up 40-45%; markets have pulled forward 2-3 years of growth into today's multiples."

TVS Motor has the strongest re-rating support

Among the three companies, Gate said TVS Motor has the strongest support for its re-rating, citing its earnings growth and return on capital employed.

"TVS Motor has the best cover for its re-rating — 21% EPS CAGR (FY26-29E) and 40% ROCE (FY26E), the strongest in the pack, so its re-rating is closer to earned than borrowed."

TVS Motor's stock rose from ₹3,020.30 on August 14, 2025, to ₹4,200 on September 3, 2026, delivering a 39.06% return.

Ashok Leyland: Re-rating more than results

For Ashok Leyland, Gate said the stock's story is more about re-rating than earnings growth.

"Ashok Leyland's story is more re-rating than result: 12% EPS CAGR (FY26-29E) against a Market PEG of 2.1x as compared to our implied 1.7x, so the CV-cycle optimism is running slightly ahead of the numbers."

Ashok Leyland's stock rose from ₹121.96 to ₹169.35 during the period, delivering a 38.86% return.

Bajaj Auto has the widest valuation gap

Bajaj Auto has the widest gap between its Market PEG and implied PEG among the three companies, Gate said.

"Bajaj Auto shows the widest gap in Market PEG of 2.3x as compared to implied 1.8x, making it the most stretched of the three on a growth-adjusted basis."

Bajaj Auto gained 45.13%, rising from ₹8,213.50 on August 14, 2025, to ₹11,920 on September 3, 2026.

GST cut boosts demand for two-wheelers, economic four-wheelers

Rahul Sharma, Head of Research at Equity99, said the rally in auto-ancillary stocks was driven by valuation re-rating following the GST rate cut, along with margin expansion and accelerated replacement cycles.

"The actual rally in auto ancillary stocks was driven by valuation rerating which got triggered by GST rate cut coupled with margin expansion and accelerated replacement cycles."

Sharma said volume growth in auto ancillaries has been good but uneven.

"In the case of auto ancillaries, volume growth has been good but uneven."

The GST rate cut created demand in two-wheelers and economic four-wheelers, which led to increased demand for auto ancillaries and, in turn, volume growth, Sharma said.

"The GST rate cut created good demand in two wheelers and economic four wheelers which led to increased demand for auto ancillaries and in turn volume increase."

EV content, fleet modernisation seen as next growth drivers

Sharma said the next leg of growth for auto ancillaries is expected to come from EV content in vehicles and replacement demand from medium and heavy commercial vehicles.

"New leg of growth is expected to come from EV content in vehicles and M&HCV replacement due to fleet modernization."

He identified Samvardhana Motherson International as his top pick in the current scenario, citing its expansion into non-auto verticals and debt reduction.

"Our top pick in current scenario would be Samvardhana Motherson driven by its expansion in non-auto verticals like aerospace and debt reduction which in turn offers good earnings visibility."

Samvardhana Motherson International gained 74.01%, rising from ₹93.10 to ₹162 during the period.

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Earnings catch-up needed for further re-rating

For the auto stocks under his coverage, Gate said the next leg of the rally will depend on whether GST-cut volumes translate into festive-season retail and margin improvement.

"The next leg needs GST-cut volumes to actually show up in festive-season retail and margin until those earnings catch-up happens, further re-rating is hard to justify."

Data compiled by: Ritesh Presswala

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Disclosure: This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an investment advisor. Gaurav does not hold any financial interest in mentioned companies as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.