Emkay Global, in a fresh strategy note on Monday, said that India’s GST rationalization is a growth-accretive, big-ticket reform. The domestic brokerage has upped its Nifty target to 28,000 for September 2026 and recommended stock investors to play this through autos and cement.
To recall, the Prime Minister Narendra Modi had in his Independence Day speech on August 15 announced major GST rationalization, as per which the rates would be condensed to two major slabs.
Subsequent media reports suggested a rationalization to three rates — 5 per cent, 18 per cent, and a sin tax rate of 40 per cent, though the reports are unconfirmed.
Emkay Global sees this as a massive positive for India as it is a consumption stimulus, will lead to ease of doing business with fewer rates, and result in greater formalization of the economy as cost-benefit of evasion turns adverse.
Emkay Global said the GST rationalization would benefit companies in sectors such as auto, consumer durables (AC), cement sector and packaged foods.
5 stocks to benefit from GST 2.0
“The best way to play this would be through companies addressing mass-segment brands in each category –we pick Hero Motocorp, Maruti Suzuki India, Voltas, and Ultratech Ceemnt as key stocks; Bikaji is a small-cap idea. The benefits accrue to a narrow segment of the market (9.5 per cent of Nifty) with a negligible (below 1 per cent) direct EPS impact for the Nifty. We estimate 10-15 per cent EPS revisions for the companies in the relevant sectors,” Emkay said.
The domestic brokerage said the GST 2.0 would speed up formalization of the economy and improve competitiveness of Indian companies.
It expects the Centre may absorb 0.1 per cent/0.2 per cent slippage in the central fiscal deficit for FY26/FY27 – partially made up by buoyancy and asset sales.
The BJP has the numbers to push this through, although it will need to convince state governments (including their own) as the revenue loss pushes a few beyond the 3 per cent/3.5 per cent deficit ceiling.
Emkay said the implementation timelines are uncertain, given the multi-step approval process.
“The government should look through near-term fiscal slippage; India’s complex GST is a millstone around the growth neck, and rationalization is worth the risk. Strong macro-financial stability, highlighted by the recent ratings upgrade, makes this the perfect time to push this through. We do note that this is not a done deal: GST Council approval is needed and rates on individual categories could change in the final announcement,” Emkay said.
Calling GST 2.0 a rerating trigger from the market, Emkay Global sees long-term growth benefits to the economy. It revised its Nifty target to 28,000, with an aggressive 20.7 times 1YF PER (+1sd above the 5Y average).
“The GST rationalization offsets near-term worries on weak growth and tepid earnings. The six-week downtrend should now reverse, as i) the outlook for earnings improves considerably, and ii) valuations will factor in the broader positives of this big-ticket reform measure. This move supports our sector positioning: we are OW on Consumer discretionary, and prefer SMIDs in staples and cement within materials,” Emkay said.
Trump tariff
The domestic brokerage noted that the US-Russia summit failed to arrive at a final decision, even as it made some progress.
India’s additional 25 per cent tariff remains an overhang, though there were some encouraging comments from the US President, the broking firm said.
“We see the possibility of a negotiated settlement on this issue before the 27-Aug-25 deadline. Key milestones would be a) resumption of trade talks between India and the US (on hold for now), b) any signs of India paring Russian crude imports. Even if the 50 per cent tariff remains, there are now mitigants, including the GST rationalization and the rating upgrade from S&P,” Emkay said.
S&P upgrade
S&P, meanwhile, upgraded India’s sovereign rating to BBB on August 14. Emkay GLobal said India’s outstanding overseas debt, at 19 per cent of GDP, is too small for this to be a material benefit. However, this is a timely recognition of India’s fortress balance sheet and will serve to calm potential investor fears around the impact of elevated US tariffs, it said. “It also, we believe, gives the government more freedom to risk a higher fisc through GST rationalization,” it said.
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