Nifty Auto’s P/E multiple at the lifetime high of 27,696.10 stood at 30 as against Nifty’s P/E multiple of 21.9 at an all-time high level of 26,277.35, the SBI Securities note said.
The fall is computed at the index level and not at the stock level.
The brokerage also analysed P/E multiples of major auto and auto ancillary stocks like Maruti Suzuki India (MSIL), Mahindra & Mahindra (M&M), Tata Motors, TVS Motor Company, Hero MotoCorp, Bajaj Auto, Eicher Motors, Ashoik Leyland, Uno Minda and Samvardhan Motherson and each of these stocks reported significant climbdown in their P/E multiple.
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Foot off the gas pedal
The lackluster trade in the auto stocks over the past 6 months has been due to a combination of events. One of the reasons is the below par Q3 earnings by the auto pack.
In a brokerage note, Motilal Oswal Financial Services (MOFSL) highlighted weak earnings by the auto companies. “The 3Q performance was weak with a 2% YoY dip in profit. Management commentary on FY26 demand was uncertain, with signs of moderation across segments, while the commentary appeared more optimistic about rural demand outpacing urban demand,” the MOFSL note said.
While the overall bearish sentiments weighed on the markets, for domestic auto stocks, Tesla’s entry into India also stoked fear. The US electric vehicle giant has finalised a deal to open its first showroom in Mumbai’s Bandra Kurla Complex (BKC), in what is probably the highest lease rent for a commercial space, a TOI report said.
Gurmeet Chadha, CIO & Managing Partner at Complete Circle Consultants, believes the market reaction is exaggerated: “Markets are overreacting, but this is a time to look at some names where the reaction has been more negative just from the news point of view. Somebody like a Tesla coming will boost the premiumisation of the car story. It is a win-win if an innovator comes.”
Chadha’s view aligns with historical trends—whenever a major global player enters a new market, stocks of incumbents initially decline before stabilizing. Tesla’s arrival could actually accelerate the adoption of electric vehicles (EVs) in India, benefiting local automakers already investing heavily in the segment.
Prior to this, the Indian government had cut import duty not just for big motorcycles with engines above 1,600cc, but even for small ones. This move is being seen to up the competition in the domestic market for the premium segment.
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SBI Securities sees the long term growth story intact as it sees the bulls retired hurt, but not out. It has listed a clutch of factors that could act as tailwinds for the sector. Among them are, income tax cuts in Budget 2025 along with rate cut from the Reserve Bank of India (RBI).
The latter had cut policy rate by 25 bps in the February MPC and expectations are for another 50 bps cut this year. Moreover, rural recovery could boost volumes of entry and mid level motorcycles and cars as well as tractors.
The ban on plying of vehicles older than 15 years in Delhi could drive replacement demand especially in the CV segment, it noted.M&M, TVS Motor, Escorts Kubota and Uno Minda remain its top investment ideas in this sector, which it said should be accumulated over the next 3-4 months.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
