With the GST council all set to hold two-day meeting on September 3-4, all eyes are on automobile stocks, given how festive heavy August reported strong retail sales despite the imminent GST arbitrage.
Maruti Suzuki India, TVS Motor and Mahindra & Mahindra are among brokers’ top auto picks.
Foreign brokerage HSBC said the next two weeks could be slow as customers would now like to wait for the GST cut before making a buying decision. HSBC said enquiries have increased across the segments, but discounts remained elevated in August that could come down in September.
“The month of September will also see 15 days of shraad (inauspicious buying period). CV discounts are largely stable and unlikely to go up in the near future. We expect the MHCV industry to grow by low single digits in FY26 with the majority of growth in 2HFY26. Tractor demand is expected to remain strong due to good monsoons and reservoir levels,” it said.
With potential GST cuts, Nomura India said there is more implied upside for the auto sector. The GST council meet will take place during September 3-4 to decide on the matter, it said expecting the GST on tractors to fall from 12 per cent to 5 per cent, for two-wheeler and small cars to 18 per cent from 28 per cent), for large cars to 40 per cent from (43-50 per cent) with no cess, while for EVs the GST will likely stay at 5 per cent.
“We currently see the highest upside potential for M&M (MM IN, Buy) and Ashok Leyland (AL IN, Buy) in our coverage,” it said.
BNP Paribas said the GST proposals when presented to the GST council should be able to receive the required number of votes to get approved. “We await clarity on what happens to the GST rate for the automotive industry, which is currently at a 28 per cent GST rate,” it said.
Emkay Global said the upcoming GST rate cut coupled with the festive period would be key for revival, also supported by likely tax benefits and interest rate reduction. It favours Maruti Suzuki India (ICE SUV launch on 3-Sep-25, a key trigger), TVS Motor, and Eicher Motors (EIM RE in OEMs).
“We remain positive on 2Ws, led by improved replacement demand visibility (industry volumes below the FY19 peak), potential rural recovery after a prolonged softness, and sustained rise in exports. However, OEM demand commentary is muted, and the upcoming festive season is key for growth revival amid a likely GST cut, also supported by tax benefits and interest rate reduction. In PVs, we like MSIL (ICE SUV launch in Sep-25E, a key trigger). In 2Ws, we see EIM/TVSL outperforming on strong product actions and disciplined pricing amid sustained growth in domestic/exports,” it said.
MOFSL’s dealer checks suggest some visible green shoots in two-wheelers over the last couple of months. PV wholesales in August were impacted by the impending GST rate cut proposal. CVs posted 8 per cent YoY growth over a low base of last year. The decision by the GST Council on the proposed rate cut remains the key monitorable for the sector, it said.
“Maruti Suzuki is our top pick among auto OEMs, as its upcoming new launches and the current export momentum should drive healthy earnings growth. We like M&M given the uptrend in tractors and healthy growth in UVs,” it said.