Brokerage upgrades industry forecasts, backs key auto stocks as tax relief may lift affordability and spur demand in two-wheelers and small cars.
GST Cut Could Jumpstart Auto Demand: Jefferies
Jefferies anticipates a potential GST reduction as a key catalyst for India’s auto sector, especially benefiting price-sensitive segments like two-wheelers and small passenger vehicles.
- The brokerage expects a boost in affordability, potentially reversing a patchy demand trend seen over recent quarters.
- It has raised FY26–28 volume estimates for these segments by 2–6%, with earnings upgrades between 2–8% for major OEMs.
TVS, M&M, Maruti: Jefferies’ Top Picks
Jefferies has identified TVS Motor, Mahindra & Mahindra (M&M), and Maruti Suzuki as its top stock picks in the auto space.
- TVS Motor is projected to post the highest EPS CAGR of 27% (FY25–28), supported by a strong product mix and rural recovery.
- M&M follows with an expected EPS CAGR of 19%, driven by momentum in SUVs and farm equipment.
- Maruti Suzuki is seen as a beneficiary of improved affordability in entry-level cars, where volume sensitivity to price is highest.
These companies are seen as best positioned to capitalize on potential demand tailwinds once the tax cut is implemented.
Hero MotoCorp Upgraded as Demand Outlook Improves
Hero MotoCorp, long rated underperform by Jefferies, has been upgraded to hold amid signs of near-term relief from a stronger demand outlook.
- The company led gains on the Nifty Auto index, rising over 1%.
- Eicher Motors, Bajaj Auto, and Maruti Suzuki also posted gains, helping cushion the index in an otherwise weak market session.
Tata Motors, Hyundai Labeled Underperformers
Despite broader optimism, Tata Motors and Hyundai remain Jefferies’ least preferred names in the sector.
- The brokerage cited limited earnings triggers and less favorable positioning compared to peers.
- These companies are expected to lag in margin expansion and volume growth, particularly in lower-end segments.
Auto Industry Urges Early GST Implementation
The automobile industry has urged the government to implement GST revisions before Navratri (September 22), fearing festive season disruptions.
- Dealers report a drop in fresh bookings as customers await clarity on pricing.
- The Federation of Automobile Dealers Associations (FADA) warned that uncertainty around GST timing is already weighing on short-term demand.
Nifty Auto Outperforms YTD Despite Volatility
At 10:00 AM, the Nifty Auto index was trading at 25,253, down 0.26%, outperforming the broader market decline.
- The index is up 9% year-to-date, reflecting sector resilience amid macro headwinds.
- While Hero MotoCorp, Maruti Suzuki, Eicher Motors, and Bajaj Auto led gains, M&M and Tata Motors dragged the index into negative territory.
Outlook: GST Cut Could Reignite Sector Growth
If implemented soon, a GST cut could:
- Boost affordability, particularly in two-wheelers and entry-level cars.
- Unlock pent-up demand ahead of the festive season.
- Support EPS growth across top auto names with exposure to rural and mid-income segments.
Jefferies’ revised outlook underscores confidence in the sector’s medium-term fundamentals, with TVS, M&M, and Maruti expected to lead the rally.