Auto stocks decline for fifth straight session: Analysts say overall outlook is positive, cite multiple tailwinds

Auto stocks decline for fifth consecutive session

• Nifty Auto index fell for fifth straight session, down 0.7 percent on January 13
• Analysts see correction as consolidation, not a breakdown in sector fundamentals
• Current dip seen as a buying chance for long-term investors in select auto stocks

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The shares of automakers and auto-parts makers dropped in trade on January 13, extending losses for the fifth consecutive session. Analysts have however expressed optimism, and what investment strategy investors should take after the consolidation.

The fall in the share prices pushed the Nifty Auto index down around 0.7 percent to 27,817, as seen at 12.15 pm on Tuesday. The index has fallen more than 3 percent in the past five days.

Top auto losers today:

Tube Investments of India shares were the top loser on the index, falling around 2 percent to trade at Rs 2,367 apiece. Exide Industries, Uno Minda, LIVE updates, Mahindra & Mahindra (M&M) and TVS Motor Company shares meanwhile fell more than 1 percent each.

Tata Motors Passenger Vehicles and Hero MotoCorp shares fell nearly 1 percent each, while Ashok Leyland and Eicher Motors shares were trading in the red with marginal losses.

Bucking the trend, Sona BLW Precision Forgings, Bosch, Bajaj Auto, Bharat Forge and Samvardhana Motherson International shares were trading in the green with marginal gains.

Here's what analysts say:

The recent fall in the auto stocks reflects near-term profit booking and demand concerns, rather than a structural breakdown of the sector, said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.

Harshal Dasani, Business Head at INVasset PMS, also said that the recent correction in Nifty Auto should be viewed more as a phase of consolidation than a breakdown in the sector’s fundamentals. "Auto stocks have delivered strong returns over the last year, and some near-term profit booking was inevitable, especially amid broader market volatility. Importantly, the medium-term outlook for the auto sector remains constructive, supported by multiple policy and demand tailwinds," he said.

From the March 2025 low of 19,300, the Nifty Auto index has rallied nearly 40 percent to 27,555, indicating that a lot of optimism is already priced in, said Tushar Badjate, Director of Badjate Stock & Shares. He noted that the recent correction reflects valuation rationalisation rather than demand stress.

What lies ahead?

Going forward, a rebound in demand indicators, stability in macros, and clarity in policies might help the auto names stabilize, Maurya said. However, he cautioned that till the time clear triggers on consumer demand or sector-specific catalysts emerge, volatility and range-bound action are likely to persist in the near term.

Dasani noted that the potential GST rationalisation on automobiles, expectations of interest rate cuts, and income tax relief aimed at boosting disposable income can meaningfully support vehicle demand across segments. Lower financing costs tend to have a direct and visible impact on auto sales, particularly in passenger vehicles and two-wheelers. In addition, government focus on manufacturing, EV adoption, and infrastructure continues to support long-term volume growth, the analyst said.

Will Trump's 500% tariff threat impact auto stocks?

Concerns around the proposed 500 percent US tariff should not materially alter the outlook for Indian auto manufacturers, as India’s direct auto exports to the US are limited, Dasani highlighted.

The impact, if any, is more likely to be felt by select auto ancillary players supplying components to global OEMs, rather than domestic auto makers themselves.

Is this correction a buying opportunity?

"Overall, the recent correction offers an opportunity to recalibrate positions in a sector where structural drivers remain firmly intact and visibility on demand recovery continues to improve," Dasani concluded.

Badjate said that going ahead, growth is likely to be more selective—led by OEMs with strong product pipelines, export visibility and rising EV penetration, which is gradually emerging as a structural growth driver for the sector.

"While near-term volatility may persist amid the ongoing Q3 earnings season, the broader structural outlook for the sector remains intact. The current correction could offer a buying opportunity for long-term investors, supported by healthy fundamentals and the Government’s continued focus on incentives for electric vehicles and hybrid mobility. Investors should maintain a selective approach, with a preference for sector leaders that have strong EV exposure," said Vishnu Kant Upadhyay, AVP -Research & Advisory at Master Capital Services.

Ajit Mishra, SVP of Research at Religare Broking, said that with the earnings season underway, volatility is likely to persist, driven by stock-specific results. "While most stocks in the sector are participating in the move, Bajaj Auto, Eicher Motors, TVS Motor, M&M, and Maruti are displaying relative strength and can be considered for accumulation on declines," he said.

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