Impact of GST reform on the stock market and the best stock to pick during this period

 GST reforms in September 2025 are set to have a broadly positive impact across the pharma, FMCG, auto, and banking sectors, mainly by reducing indirect taxes, improving operational efficiencies, and stimulating demand through lower prices and higher disposable incomes.

Pharma Sector

GST reductions—lowering rates on all medicines from 12% to 5% and exempting numerous life-saving drugs—will support affordable healthcare, boosting demand and margins for key players. However, pharma manufacturers may face working capital pressure due to increased tax inversion (inputs taxed higher than outputs); the government offers partial ITC refunds to mitigate this. Shares likely to benefit include Sun Pharma, Cipla, Abbott, Lupin, Zydus, and Torrent Pharma.

FMCG Sector

The FMCG industry will gain from lower GST rates on daily essentials and packaged goods, as well as reduced logistics costs from simplified compliance. This should drive a consumption-led recovery, especially in rural and urban markets, leading to higher sales volume and improved margins. Stocks such as HUL, Dabur, Nestle, Britannia, and Godrej Consumer stand out as core picks during this period.

Auto Sector

The auto sector benefits from significantly lower GST rates on small cars (down to 18% from 28%), two-wheelers, and entry-level vehicles, which will stimulate demand and make cars and bikes more affordable for consumers. OEMs focusing on small cars and mass-market two-wheelers are natural winners, notably Maruti Suzuki, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, and Ashok Leyland.

Banking Sector

Banks will indirectly benefit from the GST-led demand surge, as falling inflation, higher consumption, and greater economic activity drive loan growth and retail credit expansion. Operational efficiencies from lower indirect tax costs will aid margins and competitiveness. Top private banks and NBFCs with strong retail presence are attractive, particularly HDFC Bank, ICICI Bank, Bajaj Finance, and L&T Finance.

Sector	Recommended Stocks
Pharma	Sun Pharma, Cipla, Abbott, Lupin, Zydus, Torrent Pharma
FMCG	HUL, Dabur, Nestle, Britannia, Godrej Consumer
Auto	Maruti Suzuki, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, Ashok Leyland
Banking	HDFC Bank, ICICI Bank, Bajaj Finance, L&T Finance

 The GST reforms present a strong opportunity for investment in these sectors, especially by accumulating stocks that are direct beneficiaries of reduced taxes and rising consumer demand