Nifty Auto rebounds from day's low, up 2% on reports of rare-earth pivot to Australia

Nifty Auto gains 2 percent as reports hint at rare-earth pivot to Australia

The Nifty Auto index rebounded strongly on June 18, climbing 2 percent from the day’s low after reports suggested that India could turn to Australia as an alternative source for rare-earth magnets. These materials are critical to electric and hybrid vehicles, and India currently imports nearly 80 percent of them from China.

China’s recent export restrictions had raised concerns about supply disruptions, particularly for electric vehicles. However, news of a possible resolution buoyed investor sentiment. Shares of major automakers — including Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto, Eicher Motors, and Hero MotoCorp — rose between 1 to 2 percent in intra-day trade, emerging as top gainers on the Nifty 50.

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Sources told CNBC-TV18 that India may increase sourcing from Australia, while also boosting domestic efforts through the National Critical Minerals Mission. Measures include accelerating output, promoting recycling via the circular economy, and possibly supporting mining through non-PLI (Production Linked Incentive) measures. All mines will also be required to test for critical minerals in their waste material starting June.

India is also enhancing cooperation with countries like Argentina, Brazil, and Chile to secure access to critical minerals.

Rare-earth magnets are vital for permanent magnet synchronous motors (PMSMs), which are widely used in electric vehicles due to their energy efficiency, high torque, and compact size. Hybrid vehicles also rely heavily on these magnets for performance.

Manoj Bahety, founder and fund manager at Carnelian Asset Management, said the near-term impact on the broader auto sector is limited, as many companies had sufficient inventory and the immediate pressure was largely symbolic, tied to US-China trade tensions.

“The disruption was mainly a concern for EVs. Traditional ICE vehicles and the overall auto segment remain in a comfortable zone. With expectations of a good monsoon, demand for two-wheelers and tractors should improve, and even auto ancillaries and PVs (passenger vehicles) look promising,” he said.

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