Auto stocks on fast track in FY26; two have already doubled investors’ wealth

The BSE Auto index is racing ahead in FY26, emerging as the top-performing sector among BSE sectoral indices. The index has surged 32% so far, outpacing all sectoral indices and trading much higher compared with the benchmark BSE Sensex, which has gained 8.5% over the same period.

Within the BSE Auto index, nearly 40 stocks have posted gains of over 20% in just over nine months. Leading the rally are marquee names such as Ashok Leyland, Hero MotoCorp, TVS Motor Company and Maruti Suzuki India, which have surged 40–80%, delivering substantial returns to investors.

Looking at the broader BSE auto universe, the standout performers are SML Mahindra and Force Motors, which have skyrocketed 185% and 121%, respectively, creating multibagger wealth for investors in a remarkably short span.

Strong Q3FY26 earnings outlook:

Auto companies are poised to post robust results in Q3FY26, according to Elara Capital. The brokerage expects revenue for auto OEMs, excluding Tata Motors, to rise around 29% YoY and 14% QoQ, fuelled by double-digit volume growth across segments driven by a healthy festival season. Auto ancillary revenue is also expected to grow 12.3% YoY.

Demand remains strong for passenger vehicles and two-wheelers, with retail growth of 19.2% and 19.8%, respectively, in Q3. This healthy demand has kept inventories comfortable, prompting Elara Capital to revise passenger vehicle growth for FY26 to 8%, up from 5%, while maintaining the two-wheeler growth forecast at 9%. Medium and heavy commercial vehicles and light commercial vehicles are also seeing upward revisions to 9% and 11%, respectively, while tractors continue to outperform with projected growth of 19% YoY.

Margins are expected to benefit from operating leverage, even as commodity pressures linger. Maruti Suzuki could see EBITDA margins expand 100 bps QoQ to 11.5% or 12.7% including the SMG merger, supported by a stronger mix of high-value models. M&M’s auto segment may see margins improve despite sequential declines in ASPs due to a weaker BEV mix.

Two-wheeler makers such as TVS Motor and Bajaj Auto stand to benefit from a weaker rupee on exports, although Royal Enfield may see a slight ASP contraction of around 1% QoQ. Auto ancillary firms are projected to see revenue growth of 12% YoY, led by production across segments, with standout performers including Uno Minda, Minda Corp, Endurance and Gabriel.

Top picks and outlook:

Elara Capital’s top picks among OEMs include Maruti Suzuki, M&M, TVS Motor and Eicher Motors, while leading ancillary names are Uno Minda, Gabriel India, Minda Corp and Sona BLW. Conversely, the brokerage maintains a cautious stance on companies such as Samvardhana Motherson, Bharat Forge, Motherson Sumi Wiring India and the tyre segment.

With strong demand, favourable festival season trends and robust operating leverage, the auto sector looks set to remain a wealth generator in FY26, potentially producing more multibaggers along the way.

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