Though the economy may benefit from GST, effect on stock benchmarks may be limited

MUMBAI: The Indian economy is expected to get a boost from the goods and services tax (GST) when it’s rolled out but the effect on stock benchmarks may be limited. That’s because only a fourth of the 50 companies on the NSE Nifty will be direct beneficiaries of the landmark tax reform.

According to data compiled by ET from various brokerages, 12 Nifty companies are seen getting a boost from GST in the long term. These together constitute 16% of weightage on the Nifty. GST’s impact will be neutral for almost 15 companies that constitute about 22% of the weightage.



Excluding ITC, the top seven Nifty companies by weight–Infosys, HDFC, HDFC Bank, Reliance Industries, Tata Consultancy Services, Larsen & Toubro and ICICI Bank— won’t be impacted by GST.

On Nifty companies such as NTPC, Power Grid, Tata Power, ONGC, GAIL and Reliance Industries, GST will have neutral or no impact because electricity won’t be covered under the levy and key petroleum products and natural gas will also be exempt.

Banks and the IT sector, which account for almost 40% of weightage on the Nifty, will also not be impacted by GST.

“I do not think anybody is going to reposition their portfolios very meaningfully,” said Sanjeev Prasad, senior executive director and co-head, Kotak Institutional Equities. “If earnings numbers do not come through as projected by the street, there is some scope for disappointment as we go forward.”

The Rajya Sabha approved the constitutional amendment that paves the way for GST on Wednesday. The government hopes to roll out the levy by April 1 next year but much work remains to be done before then.

Auto companies such as Bajaj Auto, Eicher Motors, Hero MotoCorp, Mahindra & Mahindra, Maruti Suzuki and Tata Motors are set to benefit from GST as the overall tax is likely to drop besides which crossing state borders will become easier. Benefits will also accrue to cement companies like ACC, Ambuja Cement, Grasim and UltraTech.

Apart from cement and automobiles, Asian Paints is also likely to be a beneficiary among the Nifty 50 with improved competitive positioning against the unorganized segment and logistics cost savings.