Nomura picks top auto stocks as Maruti, M&M expect 1% YoY PV growth in FY26

Auto Stocks Today: The FY26 outlook for passenger vehicles is "extremely cautious" as affordability remains difficult. Besides, weak rupee has increased input costs

Nomura on auto stocks: Despite the Narendra Modi government’s efforts to revive consumption with income tax relief in Budget 2025, automobile companies are projecting cloudy demand look, at least for the passenger vehicle sales, for the next financial year of 2025-26 (FY26).  

The sentiment was highlighted by representatives from the automobile industry at industry body Society of Indian Automobile Manufacturers’ (SIAM’s) 19th ‘Looking Ahead Conclave’ in New Delhi.

PV Industry FY26 Outlook

 

Attended by the senior management of Maruti Suzuki India, Hyundai Motor India, Mahindra and Mahindra (M&M), Kia Motors, Hero MotoCorp, TVS Motor Company, and Bajaj Auto, among others, industry players said the FY26 outlook for PVs is "extremely cautious" as affordability remains difficult, with benefits from the government’s proposed income tax relief likely to be limited for the bottom-of-pyramid segment.

 

 

Besides, weakening of the Indian rupee has raised input costs. Hence, while the premium/SUV segment will continue to do well, the mass segment may remain subdued, analysts at Nomura said in a note, citing industry players.

 

Maruti Suzuki, Hyundai, and M&M expect only 1.0-1.5 per cent year-on-year industry growth in FY26, while the management of Tata Motors and Kia expect 2-4 per cent Y-o-Y growth.

 

"Car prices have gone up 60-70 per cent since FY19, making it difficult to afford cars. In FY19, the first-time buyers were 47 per cent, which has come down to 40 per cent FY25. The upgradation of buyers from two-wheeler to car is not happening either. The percentage of people in no income group is going up due to rising entrepreneurship, who are also facing financing issues," Nomura highlighted some of the PV industry's concerns.

 

That said, Nomura expects easing liquidity, improved capex, and interest rate reductions to have a positive impact ahead. It prefers M&M in the PVs space as a play on the sports utility vehicle (SUV) segment as well as rising EV adoption.

 

Two-Wheeler FY26 Outlook

As for the two-wheeler segment, industry players were positive on demand revival with TVS Motor expecting 9-10 per cent Y-o-Y industry growth in FY26, while Hero MotoCorp seeing 7-8 per cent Y-o-Y growth.

 

Amid green shoots of recovery in February, companies expect the income tax cuts, Maha Kumbh spending in Uttar Pradesh (UP), and a good marriage season to support demand.

 

Nomura, however, said dealer surveys indicate weaker near-term demand for 2Ws as well. Vehicle financiers have turned cautious, which, the brokerage believes, is affecting the entry segment in particular.

 

"However, there will be pockets of stronger growth including premium bikes, scooters, and EVs, while the entry segment may disappoint," it said while betting on TVS Motor among 2W OEMs.

 

Commercial Vehicle (CV) FY26 Outlook

Driven by increased government capex spending and interest rate cuts in FY26, Tata Motors anticipates 4 per cent Y-o-Y growth in CV space, while Ashok Leyland projects a single-digit growth in trucks and double-digit growth in buses in the upcoming financial year.Nomura thinks a pick-up in government spending, coupled with a limited impact from dedicated freight corridor (DFC) will be important to achieve decent growth in FY26. It has ‘Buy’ ratings on Ashok Leyland and Tata Motors.

 

Auto Stocks Today

The Nifty Auto Index turned positive in the stock market today, after a negative start. The Nifty Auto index today hit a low of 21,562.8 before recouping losses to hit a high of 22,073 in the intraday trade.

 

The Nifty Auto index was up 1 per cent at 22,042 level at 2:15 PM as against a 0.15-per cent dip in the benchmark Nifty50 index.

 

Among individual stocks, M&M share price was ruling nearly 3 per cent higher, Samvardhana Motherson share price was up 2.4 per cent, Bajaj Auto share price was up 1.5 per cent, Tata Motors share price 1.45 per cent, Eicher Motors share price 1.32 per cent, TVS Motor share price and Hero Moto share price 0.8 per cent each, and Ashok Leyland share price 0.6 per cent.