Auto Stocks Surge on Bullish Brokerage Calls as Value Buying reverses Early Losses

Auto Stocks Surge on Bullish Brokerage Calls as Value Buying reverses Early Losses​

Auto stocks reversed a sharp downward trend and traded in the green on Tuesday after value buying emerged, lifting overall sector sentiment. The Nifty Auto index, which had struggled earlier in the session, erased all its losses to touch an intraday high of 26,629.65, moving up 0.8 percent.

The recovery was supported by stock-specific interest amid a period of consolidation for the auto sector over recent months. Stocks like Maruti, Ather Energy, and Minda Corp are cited as potential short-term outperformers due to strong price-volume action.

Market Rebound Amidst Policy Headwinds​

Earlier in the session, the Nifty Auto index experienced significant pressure, falling up to 1.3 percent to 26,067.70. This decline followed an announcement by the Delhi government regarding a new electric vehicle (EV) policy.

The policy introduced plans that only allow for specific vehicles transitioning away from internal combustion engines. The ban specifies registering only electric three-wheelers from January 1, 2027, and electric two-wheelers starting April 1, 2028.

Analysts noted the challenges posed by these regulations. Yogesh Aggarwal of HSBC stated that pushing EV adoption presents a "net basis negative" scenario for India’s economy and the overall automobile sector due to disadvantages in the battery supply chain.

Analyst Views on Auto Sector Outlook​

Brokerage analysts are tempering market concerns with positive outlooks driven by demand and regulatory shifts. Ruchit Jain, Vice President at Motilal Oswal Financial Services, stated that while the sectoral index is not yet poised for a breakout, good price-volume action could lead to short-term outperformance in specific companies within the auto and ancillary space.

Taher Badshah of Invesco Mutual Fund added that "Delhi leads India's push towards EV adoption," remaining positive on Indian auto OEMs across both two- and four-wheelers. He noted that oil price retracement keeps auto demand strong, and he likes auto ancillaries due to their potential for wallet share growth.

Key Gainers and Stock Specific Catalysts​

Maruti Suzuki India emerged as a top performer, rising by up to 5 percent after Jefferies upgraded the stock to "Buy." The brokerage firm set a target price of Rs 16,500 per share, suggesting an upside of around 23 percent from the previous closing price.

Jefferies cited improving demand prospects and easing cost pressures as reasons for the upgrade. The report noted that softer metal prices are expected to mitigate margin risks for India's largest carmaker. Tata Motors Passenger Vehicles and Exide Industries also posted gains, rising by 2.10 percent and 1.28 percent, respectively.

EV Policy Impact and Corporate Outlook​

Nomura highlighted that the Delhi EV policy includes tax concessions, charging infrastructure incentives, and proposed a government investment of Rs 15,000 crore during FY27-30. This policy is expected to strengthen the drive towards electric vehicle adoption.

Mahindra & Mahindra (M&M), Tata Motors Passenger Vehicles, Ather Energy, and Sona BLW were identified by Nomura as likely key beneficiaries of this EV push. HSBC also maintained its "Buy" rating on M&M with a target price of Rs 4,200 per share, predicting that OEM margins are likely to remain strong in FY27 and FY28 given the sharp increase in passenger vehicle EV penetration.

Auto component stocks such as Bosch and Uno Minda also saw gains during the day's trading session. Among other positive movers were Bajaj Auto, Ashok Leyland, and TVS Motor Company, all gaining up to 1 percent.