Jefferies sees GST cut boosting autos, backs M&M, Maruti; Hero Moto tops Nifty

Jefferies sees TVS Motor and Mahindra & Mahindra (M&M) as the biggest beneficiaries of the demand tailwinds, projecting the highest EPS compound annual growth rate (CAGR)

International brokerage house Jefferies expects a possible cut in the Goods and Services Tax (GST) to act as a significant trigger for the automobile sector, particularly benefiting demand for two-wheelers and small passenger vehicles. The brokerage believes that a lower tax incidence would lift affordability in price-sensitive segments, giving automakers the much-needed boost after a patchy demand environment in recent quarters.

Hero MotoCorp rose over a percent to become the top gainer on the Nifty.

Factoring in the potential tax cut, Jefferies has raised its FY26–28 industry volume estimates for two-wheelers and passenger vehicles by 2–6 percent. This upward revision, in turn, has led the brokerage to forecast 2–8 percent earnings upgrades for leading manufacturers such as TVS Motor, Hero MotoCorp, Maruti Suzuki, and Hyundai.

Follow our LIVE blog for all the latest market updates

Among individual companies, Jefferies sees TVS Motor and Mahindra & Mahindra (M&M) as the biggest beneficiaries of the demand tailwinds, projecting the highest EPS compound annual growth rate (CAGR) for FY25–28 at 27 percent and 19 percent, respectively. Maruti Suzuki also remains in focus as an industry bellwether, expected to gain from a volume push in small cars where affordability plays a key role.

In terms of stock preferences, Jefferies named TVS Motor, M&M, and Maruti Suzuki as its top picks in the sector, underpinned by strong earnings visibility and product positioning. Hero MotoCorp, which had earlier been rated underperform, has been upgraded to hold as Jefferies sees some near-term relief from an improved demand outlook. However, Hyundai and Tata Motors remain underperformers in the brokerage’s view, with limited earnings triggers relative to peers.

According to several media reports, the automobile industry has urged the Centre to implement the new GST rates by the Navratri period on September 22 instead of Diwali, fearing a potential hit to festive sales if the rollout is delayed.

Also read: InterGlobe Aviation shares sink 4% as 3.1% equity exchanged, Gangwal family likely sellers

Nuvama Institutional Equities’ dealer checks last week showed that while customer enquiries were steady, fresh bookings dropped sharply as buyers chose to wait for clarity on tax changes. The Federation of Automobile Dealers Associations (FADA) has also flagged the issue, warning that GST-related uncertainty is already disrupting near-term demand.

At about 10 am, the Nifty Auto index was trading at 25,253, lower by 0.26 percent, much lower than the broader market selloff in today's session. Nifty Auto index is up 9 percent since the beginning of the year. Hero MotoCorp, Eicher Motors, Bajaj Auto, and Maruti Suzuki were the top gainers on the index. Tata Motors and M&M kept the index in the red.

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.