Nifty Auto Falls Nearly 8% in a Month: Should investors worry about auto stocks?

The Nifty Auto index fell over 2 per cent on Wednesday. Image Credit: Magnific/Canva

The Nifty Auto index fell over 2 per cent on Wednesday, with automobile stocks declining despite growth in vehicle registrations during the initial phase of the festive season.

The index fell 580.15 points, or 2.27 per cent, to 25,011.10, as of 1:40 PM. Sona BLW Precision Forgings, Eicher Motors, TVS Motor Company, Uno Minda and Bosch were among the major laggards in the index.

Vehicle registration data for the first seven days of the ongoing festive season showed growth across two-wheelers, passenger vehicles, trucks and tractors. According to a Jefferies report, two-wheeler registrations rose 23 per cent year-on-year, while passenger vehicle registrations increased 7 per cent during the period.

Citi said Indian automobile demand remained supportive, driven by healthy retail demand, new product launches and improving rural trends. The brokerage said two-wheeler demand had been more resilient than expected and raised its estimate for industry volume growth to 9 per cent year-on-year in FY27, from 7 per cent earlier.

However, Citi remained cautious about margins due to elevated commodity costs and competitive intensity. The brokerage raised its earnings estimates for Hero MotoCorp, TVS Motor Company, Bajaj Auto and Eicher Motors.

Among two-wheeler original equipment manufacturers (OEMs), Eicher Motors remained its preferred pick. In the auto components segment, Citi preferred Endurance Technologies and upgraded its estimates for the company's India business as well as Varroc Engineering.

Nifty Auto falls 2%; Sonacoms, Eicher Motors lead losses

Among individual stocks, Sona BLW Precision Forgings fell 3.87 per cent, followed by Eicher Motors, which declined 2.88 per cent. TVS Motor Company dropped 2.81 per cent, while Uno Minda lost 2.67 per cent.

Bosch shares fell 2.66 per cent, while Tube Investments of India declined 2.56 per cent. Hero MotoCorp and Bajaj Auto dropped 2.32 per cent and 2.31 per cent, respectively.

Bharat Forge shares declined 2.17 per cent, while Maruti Suzuki India fell 1.91 per cent. Ashok Leyland lost 1.88 per cent, and Tata Motors Passenger Vehicles declined 1.46 per cent.

Mahindra & Mahindra shares fell 1.39 per cent, while Samvardhana Motherson International declined 1.07 per cent. Hyundai Motor India was down 0.82 per cent.

Two-wheeler registrations rise 23% during initial festive period

Vehicle registration data for the first seven days of the ongoing festive season showed that two-wheelers recorded the highest growth among the major automobile segments.

Registrations during October 11-17 rose 23 per cent year-on-year compared with the corresponding period in 2025, which ran from September 22-28. The growth came despite a high base following the Goods and Services Tax (GST) cut last year, according to the brokerage report.

During the first half of FY27, covering April to September, two-wheeler registrations increased 22 per cent year-on-year, while wholesales rose 17 per cent.

The ongoing festive season runs from October 11 to November 11. Compared with 2024, two-wheeler registrations during the initial seven-day festive period have grown at a compound annual growth rate (CAGR) of 17 per cent.

The brokerage preferred two-wheeler manufacturers over four-wheeler companies in the OEM segment. It identified TVS Motor Company and Eicher Motors as its preferred buys, followed by Mahindra & Mahindra.

Citi also said two-wheeler demand had been more resilient than expected. It raised its estimate for industry volume growth in FY27 to 9 per cent year-on-year from 7 per cent earlier and increased its earnings estimates for Hero MotoCorp, TVS Motor Company, Bajaj Auto and Eicher Motors.

Passenger vehicle registrations increase 7% year-on-year

Passenger vehicle registrations increased 7 per cent year-on-year during the first seven days of the festive season, according to the brokerage report. The growth was lower than the 23 per cent increase recorded in two-wheeler registrations during the same period.

However, passenger vehicle registrations and wholesales grew 28-29 per cent year-on-year during the first half of FY27, covering April to September.

Compared with 2024, passenger vehicle registrations during the initial festive period have grown at a CAGR of 10 per cent.

The brokerage's preference for two-wheelers over four-wheelers reflects the difference in registration growth during the initial festive period. While passenger vehicles continued to record year-on-year growth, two-wheelers reported a faster increase.

Mahindra & Mahindra remained among the brokerage's preferred automobile stocks after TVS Motor Company and Eicher Motors. Its valuation framework assigns a price-to-earnings multiple of 24 times estimated FY28 earnings to its automobile and tractor businesses, along with Rs 538 per share for the value of its subsidiaries.

The brokerage identified lower-than-expected tractor and SUV volumes as key downside risks to its valuation of Mahindra & Mahindra.

Truck registrations nearly double; tractor registrations rise 28%

Truck registrations during the first seven days of the festive season were approximately twice the year-ago level, according to the report. However, the increase was partly supported by a low base, as truck registrations had declined 32 per cent year-on-year during the corresponding period last year.

Compared with 2024, truck registrations during the initial festive period have grown at a CAGR of 17 per cent.

Tractor registrations increased 28 per cent year-on-year during the first seven days of the festive season. For the first half of FY27, tractor registrations rose 18 per cent.

The brokerage flagged concerns about tractor demand during the second half of FY27 because of a high base and a weak monsoon.

The registration data showed growth across two-wheelers, passenger vehicles, trucks and tractors. Two-wheelers recorded the highest year-on-year growth among these segments, followed by tractors, while passenger vehicles registered a 7 per cent increase.

The brokerage identified TVS Motor Company and Eicher Motors as its preferred buys in the automobile sector, followed by Mahindra & Mahindra.

For TVS Motor, it used a valuation multiple of 40 times estimated September 2028 earnings, compared with the company's 10-year average of 36 times. The higher multiple than those assigned to Hero MotoCorp and Bajaj Auto reflected its growth outlook and potential market share gains. Key risks include a prolonged demand downturn in domestic and export markets and lower-than-expected margin expansion.

For Eicher Motors, the brokerage valued the Royal Enfield business at 35 times estimated FY28 earnings and its commercial vehicle business at five times estimated FY28 price-to-book value. Key risks include a prolonged two-wheeler slowdown and lower-than-expected Royal Enfield margins.

In the auto components segment, Citi preferred Endurance Technologies and upgraded its estimates for the company's India business and Varroc Engineering. It, however, remained cautious about margins across the automobile sector because of elevated commodity costs and competitive intensity.

The Nifty Auto index remained under pressure. The index has declined 0.31 per cent over one week, 7.85 per cent over one month, 8.08 per cent over three months and 5.81 per cent over six months. The index has fallen 11.95 per cent year-to-date and 7.90 per cent over one year.