Buy the dips in auto ancillary stocks for long-term gains, say analysts

Auto ancillary stocks have surged in FY26 on the back of strong November 2025 auto sales and a GST rate cut. Analysts see medium-term upside but advise selective investing as valuations turn rich

Auto ancillary stocks to buy: Shares of auto ancillary companies have seen an impressive run so far in the financial year 2025-26 (FY26), with select stocks surging over 100 per cent during the period.

 

Analysts say the growth in November 2025 auto sales, lifted by a cut in the goods and services tax (GST) rate, has set the stage for a sustained uptick in auto demand going ahead. This, they said, would keep the demand for components, tyres, batteries, and replacement parts intact inthe months ahead.

 

They, however, caution that most auto ancillary stocks are “fairly valued” post the double digit run-up in FY26, leaving selective investment opportunities in the segment.

 

"Indian auto sales have accelerated decisively, with November 2025 registering broad-based double-digit growth across segments. The GST rate cut clearly acted as a catalyst, lifting affordability, drawing back fence-sitters, and energising sentiment across urban and rural pockets," said Harshal Dasani, business head at INVasset PMS.

 

The surge, however, Dasani added, carries cyclical undertones with a portion of demand appearing to be influenced by festive tailwinds, and pre-buying after policy cuts.

 

"Investors must, therefore, distinguish between structural recovery and short-term acceleration before investing," he said.  CATCH STOCK MARKET UPDATES TODAY LIVE

Revving up

Last month, passenger vehicle (PV) sales volume grew by 19 per cent year-on-year (Y-o-Y). It fell 8.2 per cent month-on-month (M-o-M) amid a post festive-season dip.

 

In the two-wheeler segment, volumes surged 22.8 per cent Y-o-Y, but fell 8.4 per cent M-o-M.

 

Three-wheeler sales rose by 46.4 per cent Y-o-Y (down 3.5 per cent M-o-M), while commercial vehicle (CV) sales increased by 24.9 per cent Y-o-Y (down 9.5 per cent M-o-M).

 

On the bourses, Lumax Auto Technologies shares have soared 182.4 per cent so far in the current financial year, while Lumax Industries, Banco Products (India), SJS Enterprises, Carraro India, Gabriel India, Jamna Auto Industries, Bharat Gears, and Fiem Industries have added between 60.07 per cent and 123.79 per cent during the period, ACE Equity data shows.

 

By comparison, the Nifty50 index is up 11.34 per cent so far in FY26 (till December 5), and the Nifty Auto index is up 31.20 per cent.

 

Anubhav Mukherjee, partner at Prescient Capital, suggests the auto ancillaries sector could do well in the medium-to-long term. Select auto ancillary stocks, especially the ones that have been increasing their content per vehicle (CPV) much faster than the underlying auto industry, offer attractive investment opportunities, he said.

 

"Premiumization trend in the Indian auto industry is helping few component makers in niches like lighting, seats, instrumentation clusters, sunroofs, etc grow their CPV. Moreover, entry into electric vehicle (EV) parts like motors, controller units, chargers, etc, that are currently being majorly imported from China, is opening new growth avenues for many well-run auto ancillaries," he said.

 

That said, most auto ancillary stocks, he said, are fairly or overvalued at current levels as benefits from GST rate cut, and rural demand recovery have been priced-in.

 

"Investors need to be selective in identifying the companies that have business plans of either diversifying into new components or increasing CPV due to premiumisation tailwinds in their components," Mukherjee said.  ALSO READ | IndiGo stock crashes 7% on Monday; analysts see more turbulence ahead

Auto ancillary stocks: Investment strategy

As a strategy, analysts suggest investors take exposure in the sector in a calibrated manner and use dips to buy for the long term.

 

"Focus on balance-sheet strength, original equipment manufacturer (OEM) linkages, and operating leverage. Over the next 12–24 months, quality ancillary names are well placed to capture disproportionate upside," said Dasani of INVasset PMS.

 

Elara Capital remains positive on 2W and PV related ancillaries and like Uno Minda, Gabriel India, Minda Corp, and Sona BLW within the pack.

 

Axis Securities' top conviction picks include Sansera Engineering, Endurance Technologies, and UNO Minda. B&K Securities bets on Schaeffler India, Fiem Industries, Suprajit Engineering, and NRB Bearings.