M&M, Eicher, Maruti Suzuki hit record highs: Auto stocks rally decoded

Auto stocks rising today

 

Automobile stocks (auto stocks) were on a roll on Monday with five major stocks – Mahindra & Mahindra (M&M), Maruti Suzuki India (MSIL), Hyundai Motor India, TVS Motor Company, and Eicher Motors – hitting their respective all-time highs on hopes of a cut in the goods and service tax (GST) rate for auto companies.

 

Hero MotoCorp share price rallied 9 per cent to ₹5,110.55 on the BSE in today's intraday trade. Maruti Suzuki shares, meanwhile, surged 8 per cent to ₹13,966.95, while Ashok Leyland share price (₹130.60), Hyundai Motor India share price (₹2,400), and TVS Motor Company share price (₹3,217.90) soared 7 per cent each. Bajaj Auto, Tata Motors, and Eicher Motors shares, too, gained in the range of 2 per cent to 5 per cent.

 

At 10:00 AM, the BSE Auto index was trading as the top gainer among sectoral indices and was up 4.4 per cent, as compared to 1.3 per cent rise in the BSE Sensex.  READ STOCK MARKET UPDATES TODAY LIVE

Why are auto stocks rising today?

 

During his Independence Day address on August 15, 2025, Prime Minister Narendra Modi announced a potential rationalisation (reduction) of GST rates before Diwali 2025. Within hours, a Ministry of Finance statement said that the government envisaged the idea of a simplified GST regime with only slabs – standard and merit, while there would be special rates only on a few demerit goods.

 

In addition, procedural simplification and streamlining measures have been proposed to enhance ease of business and encourage wider compliance. The central government has proposed that most goods be subsumed in the 5 per cent and 18 per cent GST slabs versus the existing 5 per cent, 12 per cent, 18 per cent,and 28 per cent. Four wheelers, which fall under the 28-per cent slab at present, may be moved to the 18-per cent category.

 

"In case tax is lowered for the auto sector by 10 per cent, it could boost demand, in our view, by ~15-20 per cent. A common rate of tax for small cars and SUVs may also hand a significant advantage to SUVs. However, EVs (currently at 5 per cent GST rate) may see a meaningful impact on demand as the price gap with ICE will likely increase sharply," said analysts at Nomura.

 

It added: This would be counterproductive for all the EV adoption schemes like PLI which hand out 13-18 per cent revenue incentive to EVs to bridge the price gap between EVs and ICE. Still, if it were to happen, OEMs with higher domestic exposure such as M&M (Buy), Hero MotoCorp (Neutral), Ashok Leyland (Buy) would benefit the most and would be negative for companies which are pure EV companies such as Ola Electric (Not Rated), and Ather (Buy).  ALSO READ | Voltas, Blue Star: Here's why consumer durables stocks are in demand today 

Apart from simplification, the objective of the rationalisation exercise is also to boost affordability and consumption, Choice Equity Broking said.

 

Meanwhile,  S&P Global's upgrade of India's sovereign credit rating to investment grade (from 'BBB-' to 'BBB') for the first time in 18 years also boosted market sentiment, aiding the rally in auto stocks. This is the highest S&P rating for India received in the past 35 years.

 

"This is a significant macro and structural positive for the overall Indian market, likely supporting incremental valuation expansion driven by lower bond yields and decreased risk perception," according to Motilal Oswal Financial Services.

 

Auto sector outlook

 

The Indian auto industry's long-term outlook remains promising, driven by stable macroeconomic conditions, proactive government policies, rising middle-class income, large youth population and focus on electric mobility. Key factors influencing FY26 demand are rising disposable income, tax cuts, falling inflation, cost of ownership, government spending and positive consumer sentiment. Furthermore, the government has introduced the ‘PM E-DRIVE’ scheme to expedite electric vehicle (EV) adoption and develop charging infrastructure, positioning India to become one of the largest EV markets by 2030.

 

The Indian tractor industry is expected to benefit from the government's budgetary focus on rural development and allied agricultural activities. Factors such as improved crop price realisation, better replacement and construction demand and indication of above-normal monsoon are likely to drive growth in domestic tractor sales.  ALSO READ | Sensex jumps 1,168 pts, Nifty tops 25k: Here's why markets are rising today 

In FY26, the Indian two-wheeler industry is poised to build upon the growth trajectory observed over the preceding three fiscal years. This optimistic outlook is underpinned by several factors, viz. a strengthening of rural demand, recovery of demand in the core motorcycle and scooter markets, a sustained acceleration in the adoption of EVs, and an anticipated higher growth rate within the premium motorcycle segment, Hero MotoCorp said in its FY25 annual report.

 

Rural India continued to drive industry growth, with two-wheeler demand rising 8 per cent—outpacing urban markets. This was backed by good monsoons, higher MSPs for crops, and increased employment under government schemes, the company said.