Tata Motors, Maruti, M&M, Ashok Leyland: Why auto stocks are in focus today

Shares of automobile makers such as Tata Motors, Maruti Suzuki India, Mahindra & Mahindra (M&M) and Ashok Leyland, among others, are in focus on Monday, August 18, as there are hopes the upcoming GST reforms would bring down the GST rate on automobiles to 18 per cent from 28 per cent at present. 

The reforms are expected to be restructured to resolve classification disputes related to engine capacity and vehicle size. Sources in the Finance Ministry told Business Today that the move seeks to address distortions in the auto tax structure that have accumulated over the years. With most items currently taxed at 28 per cent proposed to be shifted to the 18 per cent slab, small cars are expected to receive the biggest relief.

Currently, small passenger vehicles measuring up to 4 metres with engine capacity of up to 1,200 cc (petrol, CNG, LPG) are taxed at a combined 29 per cent — 28 per cent GST plus 1 per cent cess. Diesel cars of the same size attract 31 per cent. In contrast, larger cars and SUVs face among the highest levies in the world, with effective tax rates ranging from 43 to 50 per cent.

"India’s GST rationalization is growth-accretive, big-ticket reform. We see this as a major market mover and upgrade our Nifty target to 28,000 for Sep-26, while recommending investors to play this through Autos and Cement," Emkay Global said.

Among auto stocks, Emkay Global prefers Maruti Suzuki and Hero MotoCorp. MOFSL sees Maruti Suzuki India, Tata Motors and Ashok Leyland as key beneficiaries of a likely reduction in GST rate from 28 per cent to 18 per cent. 

The GST reforms will involve rationalizing rates into two slabs against the existing four slabs for most items, barring sin goods. Procedural simplification and streamlining measures are proposed to enhance ease of business and encourage wider compliance. 

"It is a welcome developments for the market. Overall, we believe these announcements can collectively improve market sentiments and set the stage for an upmove after a muted performance over the past 12 months. On a YoY basis, Indian benchmark indices have remained largely flat and underperformed several key markets in CY25TD," MOFSL said.

MOFSL said the stock market is likely to respond positively, especially as multiple government measures are expected to improve overall growth dynamics and sentiments in 2HFY26.