Auto stocks continue to rally on second day; here is how Tata Motors, Bajaj Auto, Hero MotoCorp shares are faring today

Auto stocks were rallying amid expectations of Goods and Services Tax (GST) rate rationalisation for the sector.

On Sunday, Prime Minister Narendra Modi said that the central government has circulated the draft of the next-generation GST reforms among states and sought their cooperation to enact the proposal before Diwali.

The PM had announced the proposal to reform GST law in his Independence Day speech on August 15.

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.

The total tax incidence on cars, depending on engine capacity and length, ranges from 29% for small petrol cars to 50% for SUVs. Electric vehicles are taxed at a 5% rate.

However, in a written reply to the Lok Sabha, Minister of State for Commerce and Industry Jitin Prasada said China's export restriction on key rare earth magnets has resulted in a supply chain bottleneck and impacted domestic industries, including electric vehicle manufacturers.

On the second day of its rally, Nifty Auto was up 1.33% at 25,460.75. It gained almost 1.4% on Tuesday to touch an intraday high of 25,486.30.

On the index, Motherson Sumi was the top contributor, gaining 5.38%, followed by Exide Industries (4.32%), Tata Motors (3.52%), Tube Investments of India (3.29%), Bajaj Auto (2.74%) and Hero MotoCorp (2.69%).

Further, MRF (1.52%), Maruti Suzuki (1.32%), Bosch Limited (1.27%), TVS Motors (0.88%), and Ashok Leyland (0.77%) also traded higher. Shares of Eicher Motors (0.63%) and Bharat Forge (0.35%) were also adding to the rally.

Meanwhile, Balkrishna Industries and Mahindra & Mahindra were the only losers, falling 0.66% and 0.82%, respectively.

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, the report said.

The Centre's proposal, which includes doing away with the 12% and 28% slabs, will be discussed by the Group of Ministers (GoM) on GST rate rationalisation on August 21. Thereafter, the GST Council, comprising the Centre and state finance ministers, will likely meet in September and approve the final GST rate structure.