Nifty Auto index falls 1%, extends three-day decline to over 3%: What lies ahead?

As per Vahan data, most OEMs are seen posting a double-digit decline in the 10 days of Navratri and Dussehra. However, we need to remember that these data points are not comparable at all," said JM Financial. "Notably, GST rate cuts were announced on 15th August 2025 and were effective from 22nd September 2025, with the onset of Navratri. Hence, consumers postponed their purchases for that period, which in turn led to the significant pent-up demand that we saw last year with the arrival of Navratri.

While dealer checks are also suggesting a double-digit YoY decline, even dealers are comparing this over the high base of last year. To adjust this pent-up demand, we compare data from 14th August 2025 onwards till Dussehra for last year (a 50-day period) to the corresponding period this year. This comparison shows that auto demand across segments still seems to be in healthy double digits. While input cost pressure is certainly a cause of near-term concern, we reiterate that on-ground demand remains on track.

The recent correction should be used as an opportunity to accumulate good quality stocks in the sector, in our view. Our top OEM picks are TVS, Bajaj Auto, Maruti Suzuki India, Tata Motors and M&M," said the domestic brokerage. The overall industry outlook for FY27 remains positive, supported by healthy demand momentum, improving rural sentiment, premiumisation, rising EV adoption and new model launches.

However, growth is likely to moderate in H2FY27 given the high base of H2FY26, while rising input costs, higher vehicle prices and uneven monsoon conditions could temper the pace of demand recovery, said Axis Securities. Elevated inventory and intensifying competition remain key concerns for PV retail sales, said Choice Institutional Equities. "We maintain a cautiously optimistic outlook on the automobile sector for FY27E, supported by festive demand, GST-led affordability gains, premiumisation, electrification, replacement demand and continued infrastructure spending.

However, for H2FY27E, we anticipate the high base effect, rising input cost, elevated PV inventory, and narrowing affordability benefits to remain key risks. Over the few months, we anticipate that festive conversion, retail momentum, and inventory discipline will provide a clearer read on underlying demand and the margin trajectory," said the domestic brokerage.