Auto stocks to buy with up to 47% potential upside, ahead of May auto sales data

Nomura in a monthly auto sales preview note said it expected healthy demand momentum across passenger vehicles (PV) and two-wheelers despite recent fuel price hikes, as per its channel checks. That said, the foreign brokerage expects the impact of higher fuel and vehicle prices, along with inflationary pressures, may moderate auto demand in the coming months. On the other hand, increasing policy support from the government along with rising energy costs is seen accelerating the pace of EV adoption.

Within its coverage, Nomura continued to have 'Buy' call on Mahindra & Mahindra Ltd (M&M), Hyundai Motor India Ltd, TVS Motor Company Ltd, Ather Energy Ltd and Sona BLW Precision Forgings. It said increasing government policy support and rising energy costs could further accelerate EV adoption. 

For M&M, Nomura has a target of Rs 4,580, with 47 per cent upside target over Wednesday's closing price. It set a target of Rs 2,407 on Hyundai Motor India, suggesting 26 per cent upside. Nomura's target on TVS Motor stands at Rs 4,105, Ather Energy at Rs 1,120, Sona BLW Precision Forgings at Rs 720 and UNOMINDA at Rs 1,494

The brokerage noted that consumer interest in electric vehicles continued to strengthen, with passenger vehicle EV penetration seen at 6.3 per cent and two-wheeler EV penetration at 8.8 per cent in May 2026 estimates.

Nomura maintained a cautious stance on commercial vehicles, saying rising fuel costs and vehicle price hikes were likely to sharply affect demand. It also cited media reports suggesting fuel price hikes and shortages had impacted the operational fleet of commercial vehicles in parts of India.

As per Nomura, most OEMs had indicated 300-400 basis points of cost pressure in the June quarter of FY27, while price hikes so far stood at 1-2 per cent. 

It believed commercial vehicles (CV) and two-wheelers are better placed to pass on cost pressures over the next six months. For passenger vehicles, the impact is expected to vary across OEMs, with entry-level cars and two-wheelers likely to see a greater demand impact from price hikes.