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Informist, Friday, Mar. 7, 2025

MUMBAI - Analysts believe that uncertainties related to US tariffs and trade policies and reltaliatory measures from its key trading partners will likely limit the upside of Indian automobile stocks next week. US President Donald Trump had announced that reciprocal tariffs on India will be effective from Apr. 2. Automobile is among the major sectors expected to feel the heat of US tariffs and the auto parts segment accounts for 27% of outbound shipments. India charges about 7-8% customs duties on auto parts imported into the country.

While the President claims that India charges more than 100% tariffs on auto, India's highest levy on auto is currently 70%. India had reduced the luxury car duty to 70% during the Union Budget in February from 125%. On Thursday, Reuters, citing sources, reported that the US is expecting India to remove its tariffs on car imports, but the latter is reluctant to bring down such duties to zero even as it considers further cuts. 

The Economic Times reported that US-based brands such as Harley-Davidson and Tesla are currently not manufacturing vehicles to export to India. The report also said that India and US are currently in talks for potential trade deals to boost exports and production, though companies may look for more competitive markets such as China and southeast Asian countries to source goods. 

This week, the Nifty Auto index rose 2.5% and closed 0.2% higher at 21009.70 points Friday. The index has fallen around 25% from its all-time high of 27696.10 points hit in September 2024. The top five constituents of Nifty Auto hold the most weightage of 70% in the index; these companies are Mahindra & Mahindra, Maruti Suzuki India, Tata Motors, Bajaj Auto, and Eicher Motors. "We believe this steep 25% decline is nearing its end along with a reversal in the recent underperformance. Any further decline should be used as an opportunity to assume long positions in auto heavyweights headged with the Nifty 50 to capture the alpha return," JM Financial said in its technical and alternative research report Thursday.

The recent automobile wholesale data of February showed mixed trend across various segments. While the on-year growth of domestic passenger vehicles rose in low single digits, commercial vehicles was muted, and two-wheelers declined in high single digits. Tractor was the only segment that saw mid-teens growth during the month, supported by rabi sowing. 

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* M&M passenger vehicle despatches growth hits 4-month high in Feb, up 19% YoY
* Escorts Kubota tractor despatches post growth after 3 months of decline

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anjana Therese Antony
Edited by Deepshikha Bhardwaj

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