Hero MotoCorp, M&M, other auto stocks drop up to 5% despite strong August sales numbers. Should you buy the dip?

Auto stocks tumbled up to 5% on Wednesday despite August sales data showing strong demand across segments, barring tractors. Brokerages highlighted the companies that outperformed their peers.

The analysts, however, noted that a key risk to watch will be if further price hikes impact demand, particularly in the mass-market segments, as inflation and interest rates also have an upward bias. Hero MotoCorp shares plunged 5%, while Eicher Motors shares dropped over 4%.

Bajaj Auto, M&M, TVS Motors and a few other stocks fell 1-3%, while Tata Motors PV and Maruti Suzuki shares were down nearly 1%. The sharp drop pushed the Nifty Auto index down more than 2% on Wednesday morning, emerging as the top sectoral loser, as seen at 10.10 am.


Passenger vehicle sales in India grew by strong double-digits in August as automakers expedited factory dispatches to build dealer inventory, anticipating strong demand in the coming festive season. Around 4.48 lakh cars, SUVs, and vans were sold last month, marking a 36% rise from the 3.30 lakh units sold a year ago, according to industry estimates.

Maruti Suzuki India crossed the 1 million mark in total sales within the first five months of financial year 2026-27 after selling nearly 1.77 lakh vehicles in August. Tata Motors Passenger Vehicles and Mahindra & Mahindra (M&M) too reported strong sales, growing volumes by 59% and 50%, respectively, in August. Hyundai Motor India meanwhile recorded its highest-ever domestic sales for August.

TVS Motor Company saw an 18% increase in August sales at 4.34 lakh units. Local motorcycle sales at Bajaj Auto increased 10% to 2.02 lakh units during the month. At the premium end of the market, Eicher Motors’ Royal Enfield clocked 11% sales growth to 1.14 lakh units.

Also read | Car sales jump 36% in August, companies gear up for festive boom

Nomura on auto stocks

Nomura noted that despite overall strong demand momentum, some OEMs faced logistical challenges, particularly on the export side, with a few instances of logistics constraints and less working capital also seen in the domestic market. As we head into the high-base second half of the ongoing FY27, Nomura expects industry growth to moderate, although companies with exposure to EVs and new model launches should continue to outperform.

"We maintain our view that India’s EV penetration is at an inflection point and underlying demand may be 20-30% higher than sales as supply will take a few months to catch up. Some key models are Tata Punch EV (six-month waiting period), M&M XUV 9S (three months) and Ather (two-three months)," the international brokerage said.

Nomura prefers Mahindra & Mahindra, Hyundai Motor India, Tata Motors CV, TVS Motor and Sona Comstar.

Motilal Oswal on auto stocks

Motilal Oswal Financial Services also noted that retail demand trends in August were encouragingly strong across segments, except tractors, which saw a tapering in growth rates as the base catches up. As a result, August wholesales were strong across PVS, CVs and two-wheelers, which posted healthy double-digit growth, while tractor growth momentum slowed down to high single digits, it said.

Wholesales were likely driven by steady retail sales, lean inventory, and easing of supply constraints, the domestic brokerage noted, adding that Tata Motors PV and M&M outperformed their peers within the PV segment. While Maruti Suzuki and Hyundai Motors have relatively underperformed, they still posted growth in August.

In the two-wheeler segment, Bajaj Auto outperformed peers and beat Motilal’s expectations with a strong 28.3% YoY growth in wholesales. The three listed CV OEMs meanwhile posted a strong aggregate 43% YoY growth in dispatches, the brokerage noted, adding that Tata Motors CV continued to outperform peers in CVs and beat its expectations.

"Overall, given the sustained demand momentum and cooling input cost pressure, we expect renewed investor interest for the sector in the coming quarters," Motilal Oswal said, while naming Maruti Suzuki, TVS Motors and M&M as its top OEM picks. Among auto ancillaries, its top picks are Motherson Sumi Wiring India, Samvardhana Motherson International and Endurance.

Also read | Maruti crosses 1-million sales in FY27 as Hyundai, Tata Motors report strong August numbers

(With inputs from agencies)


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)