Why the market is still there even after GST reform?

Insurance is free, Automobile became cheaper, FMCG is also cheap now. So what is the truth? Where did the TV and Media trap you?

Let’s look at insurance industry where GST was reduced from 18% to 0%. I also felt positive about it but now the company has no input tax credit available. Earlier, we used to pay tax and we would take credit for it. Now credit has stopped, so their interest rate is 5 to 7% along with the expenses part, which got increased. On top of that, the ministry’s pressure is to pass on the entire benefit to the customer, which means the customer benefits but the companies profit margins will decrease. This is why stocks like SBI Life, HDFC Life ticked up initially but could not sustain the ralley. Same happened with automobiles and FMCG too.

In FMCG, we can see the demand number and it will easily take two-three quarters to get back with growing consumption numbers. Due to GST reduction, the market will get short term result but the rally cannot be sustained immediately. 50% tariff on all orders given by Donald Trump is having an impact on India.

After the speech by Prime Minister on 15th August 2025, the news of cut was going on which was already gapped up. Additionally with global pressure and FII selling, the market has crashed. So simply the GST Reform is positive in long term and also profit booking along with margin pressure in short term, made the market red.

I think big pullback will be seen in the current fiscal. For the rest of the year, there will be a pullback in government capex because tax collections are already weak and obviously after such a big GST cut, there will be further weakness in tax collections.

Now the government will focus on encouraging consumption. At the same time RBI will have to issue rate cut. I don’t think we have a choice.

Clearly the selling pressure has been very high. There is an attack on asset quality. Meaning there is clear pressure on asset quality. I think that apart from HDFC, ICICI and SBI, I think we will see tremendous asset quality detoration. It will be visible in both banks and NBFCs.

Also there are heavy layoffs in Tech Sector specifically which will eventually impact the household debt, which is at an all time high, if we now take household debt to GDP of India, then the RBI data clearly shows that the situation is quite bad. So NPAs, first on check bounties, on deleveraging. So barring the two three players HDFC, ICICI, SBI, I think the rest of the banking sector will face pressure on both sides of the balance sheet. Firstly, there will be problems in raising deposits and secondly the NPAs.

So it’s a long term journey and will have to wait till it sustains back to normal again. Do share your views of any.