The Goods and Services Tax (GST) cut—slashing rates on dairy, packaged snacks, stationery, and farm equipment to 5%—is redirecting investor focus toward mid- and small-cap counters often overlooked by headline-driven large sectors and stocks. The move, designed to ease household budgets while unlocking new consumption opportunities across rural and semi-urban India, is raising hopes of acceleration in growth in certain pockets of mass consumption.
“The GST cut is expected to stimulate consumer demand, particularly in rural and semi-urban areas, allowing households better access to quality products,” said Saket Patawari, Indirect Tax Partner for Consumer Products and Retail at EY India. Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, added, “It’s a classic demand-versus-price function—if the full GST benefit is passed on, a shift from 12–18% to 5% can meaningfully boost demand volumes.” Here are some sectors that are on the analysts’ radar currently --
Dairy & Regional Snacks
Mid-caps such as Parag Milk Foods, Hatsun Agro, Bikaji Foods, and Prataap Snacks stand to gain as GST on ghee, cheese, and packaged foods falls to 5%. Analysts say quicker shelf-price reductions will encourage broader consumption, especially where affordability is most sensitive. Parag and Hatsun are tipped to see stronger rural uptake, while snack makers Bikaji and Prataap can sharpen price points to defend market share against unorganised rivals. Lower input costs and improved margins could accelerate distribution into semi-urban clusters.
Stationery & Education Supplies
Tax relief on notebooks, pencils, and art materials brings smaller players like DOMS Industries and Navneet Education into sharper investor focus. Reduced levies cut input costs, allowing retail prices to ease and stretching school budgets. Experts say this will support stronger order flows from state boards and private institutions while improving affordability in semi-urban and rural markets, where even modest savings can lift enrolment-linked demand.
Rural Equipment & Pumps
Farm machinery makers VST Tillers, Shakti Pumps, and Escorts Kubota are poised to benefit as tractors, tillers, and irrigation gear move into the lower tax bracket. Analysts expect the reduction to bring down upfront costs for farmers, spurring capex ahead of the sowing season. Improved affordability is likely to nudge smallholders and cooperatives to upgrade machinery, widening the sales funnel in India’s highly price-sensitive hinterland.
Valuations in Focus
While investor enthusiasm is justified, valuations now pose a guardrail. Parag Milk Foods trades at 25.14x trailing P/E, below FMCG majors but still elevated for mid-caps. Hatsun Agro, at 73, trades at a 100 per cent premium the FMCG index. Whether these GST beneficiaries can spur momentum depends on visible volume growth and how much of the tax relief filters through to consumers versus boosting margins.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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