Auto stocks: broker targets and picks for FY26 upcycle

What changed for Indian auto demand

Brokerage commentary on Indian auto stocks has turned more constructive after GST revisions lowered on-road vehicle prices and improved affordability across segments. Nuvama Institutional Equities said it expects double-digit year-on-year growth across categories, driven by positive customer sentiment and better affordability. It linked the demand outlook to “next-gen GST”, new products, interest rate cuts and adequate finance availability, while flagging some pressure on rural sentiment due to a drop in retail crop prices. Separately, HSBC said prices have come off by 3% to 9% across categories after the GST revisions announced on Aug. 15, supporting both first-time buyer additions and replacement demand.

Nuvama’s top picks and segment view

In two-wheelers, Nuvama expects TVS Motor Company and Eicher Motors to lead, supported by an estimated 22% YoY rise in the domestic two-wheeler market. The firm pointed to better affordability due to GST rate cuts and adequate financing as key drivers for demand. In passenger vehicles, Nuvama said Mahindra and Mahindra (M&M) and Maruti Suzuki are expected to outperform among listed peers. It also expects exports to increase at double digits, led by growth in Asia, Africa and Latin America.

December wholesale volume estimates: key datapoints

Nuvama also shared December wholesale growth estimates for major two-wheeler makers, indicating strong YoY momentum.

CV demand expectations for Dec-25

For commercial vehicles (CVs), the report expects double-digit growth in Dec-25, with the domestic market up about 17% YoY. Drivers cited include the impact of GST cuts, improved freight availability due to higher consumption demand, adequate financing, a shift from used to new vehicles, and a low base. Nuvama also expects exports to increase at double digits due to growth in Asia.

Elara Capital’s view: consolidation, then the next trigger

Elara Capital’s Jay Kale expects India’s auto sector to consolidate after strong festive sales and GST-cut-led demand. He said Maruti Suzuki, M&M and TVS Motor remain top picks, linking the view to a rebound in small-car sales and steady tractor demand. Kale added that the next trigger will depend on how demand sustains through Q4 FY25 and into FY27. He also said Maruti Suzuki’s strong Q2 performance, driven by higher average selling prices (ASPs) and renewed traction from first-time buyers, positions it slightly ahead of M&M in the short term.

Nomura’s calls: M&M and Hyundai as ‘Buy’

Nomura identified Mahindra & Mahindra, Hyundai Motor India, and Maruti Suzuki as key auto stocks to watch, anchored on SUV demand, festive season sales, and new launches. It raised M&M’s target price to ₹4,355, implying a potential upside of 22%, and cited strong SUV demand, new launches, and expected PLI approval for BEVs. Nomura forecast M&M’s SUV segment growth at 18% for FY26, 11% for FY27 and 7% for FY28, and noted planned launches across BEVs, ICE models and potentially hybrids over the next two years.

For Hyundai Motor India, Nomura maintained a ‘Buy’ with a target price of ₹2,833, implying an 18.3% upside. It highlighted the new generation Venue, launched at an introductory price of ₹7.90 lakhs, and said SUVs account for 71% of Hyundai’s sales. Nomura projected 12% YoY growth in the first five months of FY26, compared with 3% YoY growth until October 2025, while also noting near-term margin pressure risk from the ramp-up of a new Pune plant.

Nomura assigned Maruti Suzuki a ‘Neutral’ rating with a target price of ₹16,956, implying a 4.8% upside. It expects a 5% increase in ASPs due to product mix, including CNG variants and parts, and sees margins improving in H2 FY26 due to reduced discounts and operating leverage. It revised its FY26 domestic volume forecast range to between -3% and +3% YoY, while expecting stronger 10% growth in H2 FY26. It also revised Maruti’s export volumes upwards by 4% to 432,000 units.

HSBC: targets raised after GST-driven price cuts

HSBC said recent GST revisions should lead to increased auto demand as prices fall by 3% to 9% across categories. It expects a 200-300 basis points higher CAGR over the next four to five years across auto segments due to the demand boost from GST-driven price cuts. HSBC also said auto stocks have risen 6% to 17% since the GST revisions announced on Aug. 15, and it raised FY2027 and FY2028 earnings estimates by 4% to 14% across companies.

HSBC highlighted that passenger vehicles could see price reductions of ₹40,000 to ₹1.5 lakh, with the highest reductions on ₹10 lakh to ₹15 lakh-priced vehicles. In two-wheelers, it noted the on-road price of entry-level motorcycles could fall from ₹70,000 to ₹63,000, supporting first-time buyers and replacement demand.

Choice Broking: ‘Positive’ sector view, but upside seen limited

Choice Institutional Equities upgraded the sector outlook to ‘Positive’ from ‘Neutral’ in a report dated Sept. 15, citing GST reforms and macro tailwinds, while also warning that much of the run-up in auto stocks has already happened. Since Aug. 15, it noted the Nifty Auto index rose 11.4% versus a 2% rise in the Nifty50. It also cited stock-specific gains over the period including Eicher Motors (19.3%), Maruti Suzuki (18.5%), TVS Motor (15.6%), Hero MotoCorp (12.6%), and Samvardhana Motherson (11.4%).

Choice also detailed GST slab changes it expects to matter for demand: small cars, two-wheelers and three-wheelers moved to the 18% slab from 28%; tractors to 5% from 12%; and the large car segment to a flat 40% rate.

Market performance: FY26 rally and what drove it

The broader auto theme has also been reflected in market performance commentary. In FY26 so far, 15 out of the 20 stocks in the BSE Auto Index have delivered double-digit returns, and the sector has led the market with over 24% gains, as per the information provided. The same compilation said several names have delivered outsized moves, including Hero MotoCorp, UNO Minda and Hyundai Motor India, each up over 40%, while MRF, Ashok Leyland and Bosch were cited with 35% to 38% gains. Axis Direct’s Q2FY26 earnings preview was also referenced as linking momentum to strong domestic demand, a GST rate cut, festive season tailwinds, and improving rural sentiment supported by a favourable monsoon and robust reservoir levels.

Why the GST-led affordability shift matters

Across broker notes, affordability and financing come up as the common near-term drivers for volumes. HSBC explicitly linked lower prices to an increase in first-time buyers and replacement demand, while Nuvama highlighted adequate finance availability as a support even as rural sentiment remains mixed due to crop price pressure. The scale of price cuts and slab changes also implies different sensitivity by category, from entry-level two-wheelers to compact utility vehicles and passenger cars.

Conclusion

Brokerages broadly converge on a GST-led demand tailwind for Indian autos, with Nuvama flagging double-digit growth expectations and Nomura and HSBC publishing explicit target prices for key OEMs. December wholesale estimates and CV growth expectations indicate momentum in the near term, while Elara’s view suggests the next trigger will be whether demand sustains through Q4 FY25 and into FY27. Investors are also watching how financing availability, rural demand conditions, and product launches translate into reported volumes and margins through FY26.