The GST rate cut has triggered a sharp rally across auto and auto-ancillary stocks, with analysts pointing to valuation re-rating, margin expansion, stronger demand and replacement cycles as key drivers.
Prime Minister Narendra Modi announced the government's plan for next-generation GST reforms during his Independence Day address on August 15, 2025. The revised GST rates for the automobile sector were subsequently implemented from September 22, 2025.
Among the stocks tracked, Sona BLW Precision Forgings emerged as the biggest gainer, rising 77.05%. Samvardhana Motherson International followed with a 74.01% gain, while Bharat Forge advanced 67.81%.
Bajaj Auto gained 45.13%, TVS Motor Company rose 39.06% and Ashok Leyland advanced 38.86%. Eicher Motors gained 33.41%, Bosch rose 21.81%, Exide Industries increased 12.97%, Hero MotoCorp gained 12.75% and UNO Minda rose 10.37%.
The laggards included Mahindra & Mahindra, which declined 3.53%, Maruti Suzuki India, down 0.61%, and Tube Investments of India, which fell 10.71%.
Tata Motors, meanwhile, has advanced 16% in terms of market capitalisation. The company went through a demerger last year. The combined market capitalisation of Tata Motors' passenger vehicle and commercial vehicle segments changed from ₹244,686.47 crore to ₹284,439.32 crore, representing a 16% increase.
Subhash Gate, Senior Research Associate (Auto and Auto Ancillaries) at Choice Institutional Equities, said the rally across his coverage of Bajaj Auto, TVS Motor and Ashok Leyland has run ahead of earnings.
"Across our coverage — Bajaj Auto (Target Price: 11,700, with ADD rating), TVS Motor (Target Price: 4,250, with ADD rating) and Ashok Leyland (Target Price: 195, with BUY rating) — the rally has run ahead of earnings.
"FY26-29E EPS CAGR for the three is 12-21%, but stock prices are up 40-45%; markets have pulled forward 2-3 years of growth into today's multiples."
TVS Motor has the strongest re-rating support
Among the three companies, Gate said TVS Motor has the strongest support for its re-rating, citing its earnings growth and return on capital employed.
"TVS Motor has the best cover for its re-rating — 21% EPS CAGR (FY26-29E) and 40% ROCE (FY26E), the strongest in the pack, so its re-rating is closer to earned than borrowed."
TVS Motor's stock rose from ₹3,020.30 on August 14, 2025, to ₹4,200 on September 3, 2026, delivering a 39.06% return.
