Auto stocks rallied after GST cuts prompted major automakers to slash prices.
Bank of America raised price targets across the sector, lifting Maruti Suzuki to ₹17,000 and M&M to ₹4,000, both with ‘buy’ calls.
The Nifty Auto index jumped nearly 2%, led by strong gains in Bharat Forge, Ashok Leyland, Tata Motors and M&M.
Auto Stocks Surge As GST Rate Cut Triggers Price Reductions, Boosts Optimism
Tata Motors and Mahindra & Mahindra led the charge, unveiling cuts of up to ₹1.55 lakh on popular cars and SUVs
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Summary
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Optimism around the automobile sector gathered pace on September 8 as shares of leading automakers and ancillary firms extended gains, buoyed by steep price cuts following a reduction in GST rates across most vehicle categories.
The rally was further supported by Bank of America (BoFA) Securities, which raised its price targets for several companies in anticipation of strong upside potential from the tax cuts. The Nifty Auto index rose more than 1.5% in morning trade, emerging as the day’s best-performing sectoral index. Bharat Forge and Ashok Leyland led the pack, each climbing around 4%.
Tata Motors shares gained nearly 3% after announcing that it would pass on the entire GST benefit to customers, cutting prices by up to ₹1.55 lakh across its cars and SUVs from 22 September. Mahindra & Mahindra followed with reductions across its ICE SUV line-up, including the Thar, Scorpio, Bolero and XUV700, with savings ranging from ₹1.01 lakh to ₹1.56 lakh depending on the model. M&M shares were up about 2% in response.
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BofA maintained its ‘buy’ rating on M&M while raising its target price by 7% to ₹4,000, implying more than 12% upside from Friday’s close. Samvardhana Motherson also rose nearly 2%, while Bajaj Auto gained 1.5%. Bosch, TVS Motor, Balkrishna Industries and Hero MotoCorp were all up more than 1%, adding breadth to the rally.
Two-wheeler makers too saw upward revisions in target prices, though BofA remained ‘neutral’. It set Bajaj Auto’s price target at ₹9,600, TVS Motor at ₹3,725, and Hero MotoCorp at ₹5,650.
Maruti Suzuki edged higher by nearly 1%. While the company has yet to announce price cuts, Chairman RC Bhargava told the Financial Express that reductions were likely. The Alto could become cheaper by around ₹45,000, while the WagonR might see cuts of ₹60,000–70,000. BofA lifted its price target for Maruti by more than 21% to ₹17,000, reiterating its ‘Buy’ rating.
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With broad-based gains across auto and ancillary stocks, the Nifty Auto index ended the morning session up nearly 2%, cementing its position as the day’s standout performer.
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