Auto sector outlook 2026: After a strong 2025, the Indian auto sector is entering 2026 on a stronger footing aided by domestic demand after GST rate cuts and favorable policy measures. The Nifty Auto index has already gained 22% so far this year, reflecting optimism around earnings visibility and structural growth drivers. In comparison, the benchmark Nifty 50 has added 10% in 2025 YTD.
Performance trends for the space have remained positive in recent times. The auto index rose 20% over the past one year, 15% in the last six months, 5% over the past three months, and 0.5% in the last one month.
A major catalyst for the strong 2025 was the GST rate cuts announced in September 2025, which reduced vehicle prices across segments and triggered an immediate jump in inquiries and bookings. Industry experts expect this demand momentum to carry into 2026 as affordability improves further.
Other supportive factors have been improving rural sentiment, favorable monsoon, rising farm incomes and higher infrastructure spending by the government have helped revive demand.
Winners and laggards: How Nifty Auto stocks performed
Following the broader index strength, stock-level performance has also been strong. Only four constituents of the Nifty Auto index have delivered negative returns so far this year. Ashok Leyland emerged as the top performer, surging more than 60% followed by Eicher Motors, Maruti Suzuki and TVS Motor, which also delivered stellar gains of over 50% each.
Moreover, Hero MotoCorp gained 37%, whereas, Mahindra & Mahindra, MRF and Samvardhana Motherson advanced over 15% each.
On the downside, Tata Motors and Balkrishna Industries were the biggest draggers, both declining close to 20% each during the year. Following the negative trend, Exide Industries fell around 12%, while Apollo Tires slipped over 4% in 2025 YTD
According to Mayank Jain, Market Analyst, Share.Market, “Infrastructure spending remains a major growth engine, with higher capex in roads, railways and construction driving a steady upcycle in commercial vehicles, particularly medium and heavy trucks and light commercial vehicles.”
Demand outlook: PVs, two-wheelers, CVs and EVs
Looking ahead to FY26, analysts expect balanced growth across key auto segments, though at a more moderate pace than the post-Covid rebound years. Passenger vehicle sales are projected to grow around 7%, led primarily by SUVs and higher-variant models. Two-wheelers are expected to expand 6–10%, supported by rural recovery and replacement demand.
EV adoption is also set to accelerate further. Falling battery costs, localization, and a wave of new launches are expected to drive penetration higher. Maruti Suzuki’s first mass-market electric vehicle, slated for early 2026, is seen as a key inflection point for EV acceptance in the mainstream passenger vehicle segment.
Mayank Jain added, “In FY26, passenger vehicle sales are expected to grow around 7%, while two-wheelers could see 6–10% growth as rural confidence improves and affordability rises.”
Harshal Dasani, Business Head, INVasset PMS, echoed a constructive outlook, stating, “Recent GST cuts, improving rural demand, rising affordability and healthy order backlogs have renewed OEM confidence, prompting capacity-expansion plans of 20–40% across multiple segments.”
Expert view: What should investors do in 2026?
From an investment perspective, experts advocate a selective, portfolio-based approach rather than broad-based bets. Maruti Suzuki remains a top-tier pick given its dominant market share in passenger vehicles, strong balance sheet and expanding product pipeline. A second leg of exposure can come from well-managed mid-tier OEMs with SUV-heavy portfolios and improving margin profiles.
Harshal Dasani said, “A mix of a high-quality large-cap for stability and a growth-oriented mid-cap for upside appears prudent, especially given the sector’s ongoing premiumisation trend.”
Charmi Shah, Business Head, Wealth1, highlighted that while growth will persist, it may not be explosive. “The base case for 2026 is steady growth with selective outperformance rather than a runaway boom, as pent-up demand normalises and regulatory costs rise,” she noted.
She added that market leaders in structurally strong niches remain best positioned. “In passenger vehicles, Maruti Suzuki, Tata Motors and Mahindra & Mahindra benefit from sustained SUV preference, premiumisation and visible EV pipelines, while Bajaj Auto and TVS Motor stand out in two-wheelers due to exports and premium positioning.”
On the commercial vehicle side, Ashok Leyland and Tata Motors’ CV business are expected to benefit from infrastructure spending, defense orders and bus replacement cycles. Select auto ancillaries such as Bosch, Bharat Forge and Balkrishna Industries offer selective opportunities based on technology leverage and exports.
Technical outlook: Key levels to watch
From a technical perspective, the Nifty Auto index remains well-supported with bullish momentum likely to continue in 2026 despite signs of short-term fatigue.
According to Jigar S Patel, Senior Manager – Technical Research, Anand Rathi, the index is likely to find buying interest near the 27,000 zone, with a near-term range of 27,000–28,000 and a broader band of 26,500–29,000 shaping directional cues.”
Currently, the Nifty Auto index trades around 27,900, close to its all-time high of 28,099. It remains comfortably above its 20-day, 50-day and 200-day moving averages, signaling sustained bullish momentum. Strength in heavyweights such as Maruti Suzuki, Mahindra & Mahindra and TVS Motor—each trading near record highs—underscores investor confidence in the sector’s earnings outlook heading into 2026.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
