How could GST cuts reshape consumption trends and investor sentiment in India

The simplification of GST slabs to 5% and 18% is likely to change the way people spend across major sectors. Small cars and two-wheelers get cheaper with a 12-13% price cut as GST moves from 28% to 18%, and this creates scope for higher vehicle sales. Essential FMCG items at 5% GST can see strong rural demand growth, while the removal of GST on insurance premiums makes life insurance sharply more affordable. Cement too gets a boost as construction costs come down, supporting housing and infrastructure. Together, these reforms can lift overall consumption and add meaningful strength to GDP growth.

Stock markets reacted sharply to this reform, with the Sensex jumping nearly 900 points and investors showing confidence across sectors. Autos gained the most, powered by double-digit rallies in large companies, while FMCG and financials also posted steady gains. Cement shares saw a bounce as cost reduction directly improves profitability. With all major indices displaying strength, the reforms created broad-based optimism that consumption-led sectors will remain attractive in the near term. This early surge reflects not only relief from lower taxes but also expectations that companies will pass the benefits quickly to consumers.

Looking over the medium term, these cuts can shape earnings growth for listed companies in a visible way. Autos may enjoy an 8-12% earnings push as demand revives, while FMCG staples could see 5-8% volume gains. Life insurance may benefit from premium affordability, with an expected demand jump of nearly 15-20%. Cement manufacturers should find margins improving as costs reduce and construction expands. With GDP growth possibly climbing to 6.5-7% in FY26, investors who pick strong companies and ride short-term market volatility could find attractive opportunities, though execution and policy pass-through remain the key checkpoints.