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India's Auto Boom: Nomura's Top Stock Picks Revealed
8 Jan
Summary
- Nomura identifies top auto stocks for India's booming market.
- Strong domestic volume growth fuels optimism across segments.
- Rising commodity costs pose a potential challenge for margins.
India's automotive sector is poised for significant growth, with international brokerage Nomura highlighting key investment opportunities. The firm has named Mahindra & Mahindra as its top Original Equipment Manufacturer (OEM) pick, alongside positive ratings for Ashok Leyland, Tata Motors Commercial Vehicles, TVS Motor Company, Ather Energy, and Hyundai Motor India. This optimism stems from a substantial surge in domestic volumes, with passenger vehicle sales up 22% year-on-year in Q3 FY26 and strong growth projected for commercial vehicles.
In the auto ancillary space, Nomura's top picks include Sona BLW Precision Forgings, Samvardhana Motherson International, Sansera Engineering, UNO Minda, and CEAT. These companies are expected to benefit from increased production across the industry, with OEMs projected to achieve 25% cumulative revenue growth and 27% EBITDA growth in Q3 FY26, excluding Jaguar Land Rover.
Despite the positive outlook, the sector faces potential challenges from rising commodity costs, particularly precious metals and copper, which Nomura estimates could impact Q3 and Q4 FY26 margins. The implementation of new Labour Codes may also introduce one-time costs. The tyre segment is expected to see benefits from replacement demand and original equipment recovery, though near-term margin pressures are possible.
