Nifty Auto crashes 2.9% to 10-month low. What’s driving the index decrease?

Indian auto shares got here underneath vital promoting strain in immediately’s buying and selling session, February 21, with the Nifty Auto index dropping 2.9% to the touch a 10-month low of 21,435. Fourteen out of 15 constituents of the index traded within the crimson, with M&M rising as the largest laggard, dropping 6%, adopted by TVS Motor Firm, Samvardhana Motherson, and Tata Motors, which have been buying and selling with cuts of two.5% to 4%.

The index has remained within the crimson for 11 of the final 14 buying and selling classes (together with immediately), shedding 7.71% of its worth. To be exact, the Nifty Auto index has been in a downward development since October, shedding 22% of its worth as investor sentiment dampened on account of poor gross sales, weak city client demand, and falling margins.

Additional including to considerations, automakers count on one other 12 months of reasonable efficiency for the monetary 12 months 2025-26, following an identical development seen within the present fiscal 12 months. The persistent weak spot in small automobile gross sales—pushed by affordability constraints, easing pent-up demand, and the excessive base impact—is mirrored within the sector’s progress charges.

In the meantime, the Donald Trump administration has been asserting a collection of tariffs on incoming items to the U.S., with its newest transfer proposing a 25% tariff on car imports. Moreover, reviews of Tesla’s entry into India have additionally been weighing on investor sentiment. Citi in a be aware on Wednesday warned Tesla’s India entry may disrupt native carmakers’ EV plans.

Automakers count on reasonable gross sales progress in FY26

On the SIAM Wanting Forward Conclave held on Wednesday (February 19), which introduced collectively trade stakeholders to debate market developments for the approaching 12 months, main carmakers projected home quantity progress of 1-4% year-on-year for 2025-26, based on trade sources.

Amongst particular person automakers, Maruti Suzuki and Hyundai Motor India count on passenger automobile (PV) gross sales to develop by 1%-1.5%, whereas Mahindra & Mahindra anticipates 1%-2% general PV progress, with SUV gross sales anticipated to surge by 8%. Mahindra, the maker of the Thar and XUV700 SUVs, goals to outperform trade progress.

Tata Motors initiatives 2%-4% progress, whereas Kia India forecasts trade growth of two%-3%. “PV affordability has remained constrained, and the advantages of earnings tax cuts are more likely to be restricted for the bottom-of-the-pyramid section. Moreover, forex depreciation might increase prices. Therefore, key gamers consider the premium/SUV section will proceed to carry out nicely, whereas the mass section might stay subdued,” stated Japanese brokerage agency Nomura.

In FY24, the PV trade in India achieved a big milestone by surpassing the 4 million automobile gross sales mark for the primary time, reaching a report 4.2 million automobiles, an 8.6% progress in comparison with FY23, although nonetheless beneath pre-COVID ranges.

In FY22 and FY23, PV wholesale volumes registered robust double-digit progress of 13.2% and 26.7%, respectively, pushed by pent-up demand from the COVID-affected years. Nevertheless, analysts now count on PV gross sales progress to stay beneath 5%.

Regardless of being the world’s third-largest automobile market, India lags behind China, which is six occasions its dimension. Estimates point out that automobile penetration in India, presently round 30 automobiles per 1,000 folks, stays considerably beneath international norms and is anticipated to rise additional.

Whereas carmakers count on one other 12 months of muted efficiency, two-wheeler producers have been optimistic, with TVS Motor anticipating 9-10% YoY trade progress (with the entry-level section rising at 4-5%), whereas Hero MotoCorp initiatives 7-8% YoY progress in FY26E.

Within the industrial automobile (CV) section, Tata Motors forecasts a 4% YoY progress, whereas Ashok Leyland anticipates single-digit progress in vans and double-digit progress in buses in FY26. A revival in authorities capex spending and rate of interest cuts is anticipated to drive progress.

Disclaimer: The views and proposals given on this article are these of particular person analysts. These don’t symbolize the views of Mint. We advise traders to test with licensed consultants earlier than taking any funding choices.