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Informist, Friday, Aug. 22, 2025

MUMBAI – Investors are likely to adopt a buy-on-dips approach towards automobile stocks in the near term, as these companies are expected to benefit the most from GST rationalisation, analysts said. However, some weakness could be seen in these stocks if overall market sentiment is affected with additional US tariffs kicking in from Wednesday.    

This week, the Nifty Auto index rose 5%, while Nifty 50 index rose just around 1%. On Friday, the sectoral index closed marginally lower at 25329.45 points. Only five of the 15 stocks closed higher, among which Mahindra & Mahindra gained the most. Technical analysts suggest maintaining a buy-on-dips trading approach for the sector and see the Nifty Auto finding support at 24800 points and facing resistance at 26000 points. 

"The probability of GST cuts along the lines is quite high, in our view, now," Nomura Global Markets Research said in a report Friday. "We believe that the tax on small cars and two-wheelers will come down to 18% (from 28%), and for large cars it will come down to 40% (from 43-50%)," Nomura said. This will be positive for most original equipment manufacturers.

"We also continue to believe that the GST on tractors will come down to 5% from 12%," the broking firm said. This, Nomura believes, will provide the much-needed boost to consumer sentiment around the festival season. "For the auto sector, we estimate demand can rise by 5-10% on an annualised basis, following the tax cuts," the report said, adding that the initial rush of demand is likely to be quite high during the festive season.

Domestic exporters shipping automobile to North America will also find themselves in a tight spot as it is the top destination for sector, S&P Global Ratings said in a report Friday. Automobile exports will have an impact at $2.6 billion and accounts for 10% of the total exports. India's share in US imports is small, at less than 1% for automobiles, and the US can easily replace Indian vehicles – a big challenge exporters would face, S&P said.

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

US$1 = INR 87.53

Reported by Gopika Balasubramanium

Edited by Avishek Dutta

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