Auto and auto ancillary stocks have come under pressure this month, with the sectoral benchmark Nifty Auto falling 6% so far in September through last Friday. Maruti Suzuki has been among the major laggards, with the stock down nearly 11% during the period.
Other sectoral components, including Ashok Leyland, Mahindra and Mahindra, Bharat Forge, Tube Investments of India, Bosch, Bajaj Auto and Eicher Motors, have also declined more than 5% this month.
With the latest decline, the Nifty Auto index is on track to snap its five-month winning streak.
Why are auto, auto ancillary stocks falling this month?
Most auto and auto ancillary stocks have declined in September due to profit booking after recent gains amid elevated oil prices, increased concerns over inflation and the beginning of monetary tightening by major global central banks.
This month, the European Central Bank (ECB), the US Federal Reserve, and the Bank of Japan (BoJ) raised interest rates. This reflects growing discomfort among central banks about inflation and signals that the Reserve Bank of India may also raise rates in its next policy meeting. The auto sector is rate-sensitive. A rate hike at this juncture may hit the sector just in the middle of the festive season.
In August, major auto makers reported a healthy year-on-year rise in volume, with two-wheelers dominating the charts, and passenger vehicles (PVs) and commercial vehicles (CVs) makers reporting solid gains.
According to Rajesh Menon, Director General, SIAM, passenger vehicles, three wheelers and two wheelers recorded the highest ever sales in August 2026.
During the month, PV sales stood at 4.39 lakhs units, registering double-digit growth of 36.5% year-on-year (YoY), three-wheeler sales recorded 0.94 lakhs units, growing 22.8% YoY, and two-wheeler sales stood at 20.35 lakhs units, growing of 10.5% YoY, said Menon.
However, the ongoing West Asia conflict remains a key concern as it may distort India’s growth-inflation dynamics and derail the sector’s momentum.
Should investors buy the dip or avoid?
Most experts appear positive about the sector but suggest selective buying, keeping the company’s market reach, growth prospects, and other fundamentals in mind.
Brokerage firm Emkay Global is bullish about the sector after it hosted an expert call with a large multi-brand dealer across Mumbai/Pune.
According to Emkay, the call with the dealer reinforced a “broad-based demand upcycle across segments, with simultaneous growth across CVs, PVs, and two-wheelers sustained for several months, a breadth he has not witnessed in over a decade.”
“With Navratri/Dussehra in October and Diwali in November, the staggered festive calendar should support broad-based demand momentum despite a high base. The current cycle appears structural, supported by stretched replacement cycles and easing GST pressures, with a broad-based demand upcycle across CVs, PVs, and two-wheelers,” said Emkay.
Emkay’s top picks from the sector are Tata Motors CV and Ashok Leyland in CVs, TVS Motor Company and Ather in two-wheelers, and Hyundai Motor India and Mahindra and Mahindra in PVs.
In ancillaries, Emkay prefers Pricol, Sandhar, Craftsman Automation, and JK Tyre.
Brokerage firm JM Financial expects inventory build-up ahead of the festive season to support wholesale volumes in the near term, which can help growth rates normalise over a high base.
Among two-wheelers, JM Financial prefers TVS Motor Company, given its continued market share improvement. Within PVs, Maruti Suzuki India remains its preferred pick, given its healthy launch pipeline, revival in the entry-level segment, lean inventory, and ramp-up of two new facilities.
Mahindra and Mahindra remains well placed to benefit from the continued premiumisation of the PV market, JM Financial said.
Santosh Meena, the head of research at Swastika Investmart, believes the auto ancillary sector retains solid medium-term support from rising content per vehicle (premiumisation, electronics, EV components), export growth, localisation and stronger balance sheets.
Meena is constructive on quality names in the auto ancillary space, such as Uno Minda, Endurance, Sona BLW, Motherson, Bharat Forge, and Varroc.
“For most long-term investors, the sensible approach is to hold or accumulate quality stocks on dips rather than chase today’s move or aggressively book profits, provided portfolio concentration is not excessive; partial profit-booking makes sense only where gains have become outsized. Near-term traders should stay selective and avoid FOMO, focusing on order-book visibility, margins and valuations instead of momentum alone,” said Meena.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
