Auto index surges 16% in 1 month; What's fuelling the index's rally?

The BSE Auto index, the top gainer among sectoral indices, was up 1.3 per cent at 01:36 pm, as compared to 0.16 per cent decline in the BSE Sensex.

Auto shares price movement today: The BSE Auto index has outperformed the Sensex by gaining over 1 per cent in Wednesday’s intra-day trade after a healthy up move in the share prices of automobiles and auto ancillary companies.

 

At 01:36 pm; the BSE Auto index, the top gainer among sectoral indices, was up 1.3 per cent, as compared to 0.16 per cent decline in the BSE Sensex.

 

Tata Motors, Sundram Fasteners, MRF, Apollo Tyres, Bharat Forge, Samvardhana Motherson International, Bosch, Tube Investments of India, Ashok Leyland, TVS Motor Company and Mahindra & Mahindra were up in the range of 1 per cent to 5 per cent.

 

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Endurance Technologies, Gabriel India, Lumax Auto Technologies, JK Tyre and ASK Automotive were among the non-index auto related stocks that have rallied between 4 per cent and 10 per cent. 

 

In the past one month, the BSE Auto index has outperformed the market by surging 16 per cent, as against a 10 per cent rally in the BSE Sensex. The Auto index is quoting higher for the third straight trading day.

 

India-UK Free Trade Agreement (FTA) 

 

India and the United Kingdom (UK) signed a Free Trade Agreement (FTA) on Tuesday, May 6, 2025. The government is yet to publish the text of the deal, which is subject to legal checks, signing and ratification. According to media reports, India will cut its automotive tariffs to 10 per cent from its current level of more than 100 per cent.

 

Most automotive manufacturing plants in the UK are of premium and luxury brands, such as Bentley, BMW, Rolls-Royce, and Aston Martin, said analysts at BNP Paribas India. While among them, Jaguar Land Rover (JLR) could be a key beneficiary, the brokerage firm notes that one of its key models, Defender, is not manufactured in the UK. Also, JLR already uses its India based assembly plant for several models to enjoy the lower duty. 

 

Given that the majority of the beneficiaries are premium/luxury OEMs, the brokerage firm does not see any material impact to India-listed passenger vehicle OEMs. That said, the brokerage firm could see a slightly higher number of premium/ luxury vehicles selling in India, which are currently miniscule.

 

Sector outlook

 

Looking ahead, domestic passenger vehicle (PV) wholesales are expected to remain weak in the near term. Analysts at JM Financial do not expect any meaningful improvement in PV demand until the festive season. In the 2W segment, while retail financing in the entry-level segment remains a concern, the upcoming marriage season is expected to provide near term support to demand. In case of commercial vehicle (CV) segment, volumes are expected to witness gradual recovery led by higher Government of India (GOI) capex and improvement in infrastructure activities.

 

M&M highlighted that retail momentum remains strong, supported by Chaitra Navrati festival in April and improved farmer cash flows. Additionally, it indicated that financing remains strong and above normal southwest monsoon prediction is likely to aid tractor industry growth in the near term.

 

Improved operational performance of tyre companies in Q4

 

Tyre companies such as MRF and Ceat so far declared their January to March 2025 (Q4FY25) results have reported a healthy operational performance.

 

Tyre major MRF today reported earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin improvement of 78 bps at 15.02 per cent. The company’s profit after tax (PAT) jumped 27 per cent year-on-year (YoY) at ₹645.08 crore. Revenue grew 11.7 per cent YoY at ₹6,944 crore. The board of directors of MRF has recommended a final dividend of ₹229 (2290 per cent) per share of ₹10 each.

 

Ceat’s Q4FY25 standalone net sales grew 14.6 per cent YoY at ₹3,414 crore. Gross Margins for the quarter improved by 65 bps to 37.5 per cent, largely driven by favourable revenue mix and as a result of strong cost controls across the value chain.

 

The management said operating margins improved in Q4 by over 120 bps, largely driven by a favourable revenue mix and as a result of strong cost controls across the value chain. The company incurred a capex of ₹946 crore during FY25 largely in capacity additions that would prepare the company well to deliver its growth plans in FY26.