5 hrs ago
Auto Stocks Extend Declines After RBI Rate Hike
Auto company shares went down after the Reserve Bank of India raised interest rates.
Higher rates can make it more expensive for people to borrow money to buy vehicles.
Analysts also pointed to weak rural conditions, costly fuel and slower sales in September.
They expect some buyers to return during the festive months of October and November.
Still, that recovery may be uneven.
The industry could benefit from new models, more electric vehicles and stronger demand.
But higher material costs and a tough comparison with last year may slow growth.
September vehicle shipments grew strongly, though part of that increase was linked to unusual timing the year before.
Auto shares fell after the RBI rate hike, with TVS Motor, Bajaj Auto and Hero MotoCorp among the reported leading losers.
Analysts cited muted September domestic sales, higher financing costs and crude prices near $100 as pressures on demand.
Some experts expect festive demand to improve in October and November, while warning that weak rural conditions could weigh on entry-level vehicles.
The FY27 outlook remains positive, supported by demand, premiumisation, electric-vehicle adoption and new models, though growth may moderate in the second half.
BNP Paribas reported strong September 2026 wholesale and retail shipment growth, but rising commodity costs may add pressure to industry margins.
- Who
- Indian automakers and their investors; analysts at INVasset PMS, Axis Direct and BNP Paribas commented on the sector.
- What
- Auto shares extended their declines after an RBI rate hike, while analysts assessed demand, costs and the FY27 outlook.
- Where
- India
- When
- The report describes Wednesday trading and includes September 2026 shipment and cost data.
- Why
- Higher financing costs, muted September sales, rural weakness, elevated crude prices and rising commodity costs were cited as pressures.
Cautious outlook
Constructive outlook
Near-term demand
Cautious outlook
Muted September sales, distressed rural conditions, higher financing costs and expensive fuel could temper demand recovery.
Constructive outlook
Festive demand may pick up in October and November, and dealer bookings were described as building.
Industry prospects
Cautious outlook
Growth could moderate in H2FY27, with higher input costs, vehicle prices and uneven monsoon conditions weighing on demand.
Constructive outlook
The FY27 industry outlook remains positive, supported by demand momentum, improving rural sentiment, premiumisation, EV adoption and new models.
Key facts
- Market movement
- Auto stocks extended their fall after the RBI rate hike.
- Festive demand
- INVasset PMS expects demand may pick up in October and November.
- Monsoon
- The monsoon ended 12.6% below normal, according to Harshal Dasani.
- Crude oil
- Crude was described as near $100, raising vehicle running costs.
- FY27 outlook
- Axis Direct sees a positive industry outlook but expects growth to moderate in H2FY27.
- Shipments
- BNP Paribas said September 2026 wholesale dispatches and retail shipment growth were strong.
- Commodity costs
- BNP Paribas said its commodity cost index rose for passenger vehicles and two-wheelers.
Quotes
Harshal Dasani
Business Head at INVasset PMS
“In the long term, we prefer TVS Motor and Eicher Motors in 2W, and M&M (non-coverage) as a play in the PV/LCV/Tractor segment. We also like Ashok Leyland and Tata Motors (non-coverage) in the CV space, followed by a close watch on Eicher (VECV) for any market share gains.”
businesstoday.in
“The monsoon closed 12.6 per cent below normal, the weakest in over a decade, under a developing El Niño, and the rural economy is distressed. Entry-level cars and two-wheelers follow tractors.”
businesstoday.in
Sources
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