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Informist, Friday, Jun. 27, 2025

MUMBAI – Shares of automobile companies are expected to be among the top performers in the coming week, according to analysts. A Mumbai-based technical analyst expects the Nifty Auto index to rise as high as 24173 points next week.

The Nifty Auto closed 0.2% higher at 24007.95 points on Friday. The index gained 1.4% for the week but underperformed the benchmark Nifty 50 index which rose 2.1% this week. Among the Nifty Auto constituents, Tube Investments was the top gainer for the week, while Maruti Suzuki India was the laggard.

In the midst of a shortage of rare earth magnets, domestic two-wheeler companies grappled with a new regulatory hiccup of compulsory anti-lock braking system directive. According to media reports, the government will make this system compulsory starting January, which may mean more price hikes. Despite this, analysts expect two-wheeler makers to be better placed compared to other automobile segments such as tractors, in terms of underlying volume growth, analysts said.

Norms for the anti-braking systems will be industry-wide, including those with capacities lower than 125 cubic centimetres. These are the entry level motorcycles, whose sales have been under stress after the COVID pandemic and original equipment makers have been trying to turn their inventories into sales.

Anti-lock braking system helps prevent wheels from locking up when brakes are applied suddenly. They system reduces the chance of skidding and improves vehicle control. Currently, this system is compulsory for models above 125cc.

Two-wheeler makers are also trying to tackle the diminishing stock of rare earth magnets. Reports suggest domestic original equipment manufacturers and the government are trying to get the Chinese government to lift the export curb on these crucial elements, but so far the result has been unfavourable.

"TVS Motor is already seeing impact from the ground level is what I know, others will also see such impact, at least by the first week of July if relief is not found," an analyst at a large-sized brokerage said. "As of now, neither the companies nor the government have managed to persuade Chinese officials, and the possibility is thin due to existing stringent relations between the two countries," the analyst said. Production may be hit if there is no favourable ruling at least by the end of July, the analyst said.

On making anti-braking system compulsory for motorcycles and scooters, the analyst said the entry level segment is very price sensitive and it would hit consumer sentiment. The tax-relief in the Budget and a favourable monsoon were expected to rekindle sales growth in this segment, but original equipment makers taking price hikes to cover this new mandate would deter customers from making purchases. The two-wheeler makers may increase prices by INR 2,500-INR 4,500, the analyst said.

The government's move is expected to hit demand for such vehicles by 2-4%, Nomura Global Markets Research said in a report Friday. The broking firm expects Hero MotoCorp to be affected the most if the government makes this mandatory. The company accounted for 99% of total domestic two-wheeler sales in 2024-25 (Apr-Mar) in the less-than-125 cc segment. A total of 79% of Hero MotoCorp's revenue could be impacted by this mandate, 54% of TVS Motor Co., and 24% of Baja Auto.

On the other hand, the introduction of anti-braking system would likely benefit companies such as Endurance Technologies. This is because it specialises in manufacturing automobile components, including braking systems, that may see demand due to the new mandate, the analyst said. Nomura expects Bosch to benefit from the directive as well.

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

End

Reported by Gopika Balasubramanium

Edited by Ashish Shirke

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