India-EU trade deal: Dharmesh Kant explains why M&M, Hyundai and Maruti shares slid

Shares of Mahindra & Mahindra Ltd (M&M), Hyundai Motor India Ltd and Maruti Suzuki India Ltd came under pressure in Tuesday's session amid investor focus on the India-European Union (EU) trade agreement.

At last count, M&M shares were down 4.04 per cent at Rs 3,399.45, Hyundai Motor India slipped 3.33 per cent to Rs 2,189.15, while Maruti Suzuki India was trading 1.90 per cent lower.

Commenting on the stock reaction, Dharmesh Kant, Head of Equity Research at Cholamandalam Securities, said the decline was linked to the evolving details of the India-EU trade deal.

"With the news flow surrounding the India-EU trade deal, import duties are expected to be cut from 110 per cent to 40 per cent and eventually to 10 per cent. However, clarity is still awaited, as this applies to vehicles priced above 15,000 euros," Kant told Business Today.

He noted that this price threshold corresponds to the Rs 20–25 lakh segment, where Mahindra & Mahindra has a strong presence. "Most of M&M's SUVs are sold in this price range. It is also important to see whether the duty reduction applies to ICE (internal combustion engine) or EVs (electric vehicles). That distinction will provide more clarity on the profitability impact for these companies," he added.

"Every such player will be impacted -- whether it is M&M, Maruti or Hyundai. Some of these stocks were trading near all-time highs and at elevated valuations. The recent decline could reflect profit-taking ahead of the announcement," he also said.

"Let the fine print come first, then a more constructive analysis can be done," Kant further stated.

India and the European Union recently concluded negotiations on the trade agreement, with Prime Minister Narendra Modi and European Commission President Ursula von der Leyen formally sealing the pact. Under the agreement, tariffs on EU-made cars will be reduced in phases to 10 per cent, subject to an annual quota of 2.5 lakh vehicles, making premium imports more affordable in the Indian market.