Auto Stocks Vroom; Maruti Jumps nearly 9% Buoyed by Proposed GST Reforms

 Auto stocks grabbled the limelight on Monday, with Maruti Suzuki India jumping nearly 9%, buoyed by plans for big bang reforms in the GST regime by Diwali.

Shares of Maruti Suzuki India surged 8.94%, Hyundai Motor India zoomed 8.45%, Ashok Leyland jumped 8.12%, Apollo Tyres rallied 7.28%, TVS Motor Company climbed 6.58%, Hero MotoCorp edged higher by 5.90%, and Bajaj Auto advanced 4.52% on the BSE.

The stock of MRF went up 4.11%, Mahindra & Mahindra (3.54%), Eicher Motors (2.46%), and Tata Motors (1.78%).

Maruti Suzuki, Hyundai Motor, Ashok Leyland, TVS Motor, Mahindra & Mahindra, and Eicher Motors hit their one-year peaks in intra-day trade.

The BSE auto index jumped 4.26% to 56,233.33.

In the equity market, the 30-share BSE Sensex jumped 676.09 points, or 0.84%, to settle at 81,273.75. The 50-share NSE Nifty climbed 245.65 points, or 1%, to end at 24,876.95.

"Declaration by the prime minister on the next major reforms in GST by Diwali, is a big positive. The expectation is that most of the goods and services will be in the 5% and 18% tax slabs.                                                                                     

"Sectors like autos and cement, which are presently in the 28% tax slabs, are expected to benefit," V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said.

Prime Minister Narendra Modi on Sunday said the Centre has circulated the draft of the next-generation GST reforms among states and sought their cooperation to implement the proposal before Diwali.

Modi had announced the proposal to reform the GST law in his Independence Day speech on August 15 from the ramparts of the Red Fort.

In upcoming sweeping reforms, the GST on automobiles -- currently in the highest tax bracket -- will be restructured to resolve classification disputes related to engine capacity and vehicle size, ultimately benefiting the common man, according to government sources.

Presently, automobiles are taxed at 28%, which is the highest GST slab. A compensation cess, ranging from 1 to 22%, is levied on top of this rate, depending on the type of vehicle.

Sources said, as per the Centre's proposal for moving the GST system to a two-tier rate structure of 5 and 18% and a 40% slab for a select few items, automobiles will be placed in a slab to put an end to disputes arising due to the classification of cars by engine capacity and length.

A lower GST rate will boost demand and sales, as cars will become affordable. Thereby boosting consumption, a key idea behind the GST overhaul proposal mooted by the Centre.

"Nifty Auto led sectoral gains, jumping over 4% amid expectations of renewed demand and faster inventory clearances," Gaurav Garg, Analyst, Lemonn Markets Desk, said.