Auto stocks rise up to 3% on GST 2.0, festive demand hopes: Here's what brokerages say

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26 Aug, 2025 12:21

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The shares of auto companies gained on September 16, after recording losses in four out of the past five sessions. Brokerages remain bullish over the sector's outlook, suggesting strong upside potential for the stocks.

The Nifty Auto index rose 0.84 percent to 26,986.75, according to data on NSE at 1.10 pm. This comes amid easing trade tensions between India and US, optimism over India-European Union trade deal and expectations of rising festive demand following GST reforms boosted investor sentiment.

GST reforms: 

Centre recently announced strong cuts to the GST structure, which will take effect later this month. Analysts estimate that the GST rate cuts will strongly spur demand around Navratri, and benefit the automakers.

Maruti Suzuki has seen a 15 percent increase in customer inquiries since the GST rate cut announcement, the automaker's Head of Sales and Marketing Partho Banerjee recently told CNBC-TV18. "Overall bookings now stand at 1.5 lakh, with 10,000 new bookings coming in daily," he added.

Cooling India-US trade tensions:

Indo-US relations have seen some improvement in recent days with Trump and Prime Minister Narendra Modi agreeing to resume trade talks. Trump called Prime Minister Modi a "dear friend" and talked optimistically about the trade momentum. PM Modi, in turn, reaffirmed India and US as "close friends and natural partners" and expressed confidence that current trade talks would unlock significant potential for both nations.

Brendan Lynch, a key US trade negotiator arrived today in India to discuss 'trade issues' between Washington and New Delhi. Special Secretary Rajesh Agarwal however clarified that Lynch's one-day visit is not the sixth round of trade negotiations between India and US, but only a meeting to 'discuss' trade issues.

The cooling trade tensions between India and US, and increasing hopes of the two countries resuming trade talks may have boosted auto and auto ancillary stocks.

India-EU trade deal:

India and EU held their 13th round of talks for the proposed trade deal from September 8-12. The next round of talks will be held in Brussels from October 6-10 as both sides aim to conclude negotiations at the earliest. This too may act as a strong boost for the auto and auto ancillary stocks.

MRF shares were the top gainers on the index, jumping nearly 3 percent to trade at Rs 1,51,780 apiece. Balkrishna Industries and Bharat Forge shares followed, rising around 2 percent each.

Samvardhana Motherson, Bosch, Mahindra & Mahindra (M&M), Eicher Motors and Maruti Suzuki shares gained more than 1 percent each, while TVS Motor, Tube Investments of India and Hero MotoCorp shares were up around 1 percent each.

Ashok Leyland, Bajaj Auto and Exide Industries shares were trading in the green with marginal gains. Bucking the trend, Tata Motors shares were trading in the red with marginal losses.

HSBC on auto sector:

HSBC in its latest report said that GST-driven price cuts announced by the automakers will boost their CAGR by 200-300 basis points over the next four-five years. The international brokerage noted that the auto stocks have jumped 6-17 percent since the centre's GST revision announcement in August. It added that this will likely track earnings growth.

Growth could be front-loaded, HSBC said while raising FY27-28 EPS estimates across companies by 4–14 percent. Here are the latest rating and target prices set by the international brokerage:

• Maruti Suzuki – Buy call, Target price at Rs 17,000 per share
• Hyundai Motor India – Buy call, Target price at Rs 2,800 per share
• TVS Motor – Buy call, Target price at Rs 4,000 per share
• M&M – Buy call, Target price at Rs 4,000 per share
• Ather Energy – Buy call, Target price at Rs 600 per share

InCred sees GST rate cuts and cess withdrawal as biggest stimulus for auto sector in recent history. It said that these could trigger a two-three year cyclical recovery. The domestic brokerage raised domestic auto volume forecasts by 300 bps to 11 percent for FY26, and by 500 bps to 15 percent for FY27, led by passenger vehicles.

InCred has upgraded its ratings on Apollo Tyres, Escorts Kubota, M&M and Tata Motors.

Nomura on autos:

Nomura said the GST cuts are leading to early signs of demand recovery. It prefers M&M, Hyundai, TVS Motor and Ashok Leyland among the stocks. The cuts have translated into immediate benefits for buyers and firms are reporting stronger enquiries, surge in bookings and an improved outlook for festive demand, the brokerage said.

Also read: Our LIVE blog on stock market updates

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.