Maruti, Eicher, M&M, TVS Motor hit record highs today; what's next?

Four automakers namely Maruti Suzuki India Ltd (MSIL), Mahindra & Mahindra (M&M), Eicher Motors Ltd and TVS Motor Company Ltd saw their stock prices rallying to fresh record highs on Tuesday, as optimism over the upcoming festive season, along with GST rate cuts, raised hopes of strong sales going ahead.

MSIL scaled a record high of Rs 15,380 before ending the session at Rs 15,326.40, up 0.45 per cent. M&M touched Rs 3,723 but closed at Rs 3,703.50, down 0.17 per cent. TVS Motor hit a fresh peak of Rs 3,605.55 before settling at Rs 3,571.10, down 0.53 per cent. Eicher Motors climbed to Rs 6,938.45 during the day and ended at Rs 6,895, up 1.19 per cent.

Policy measures such as income-tax relief, the announced GST 2.0 framework with an emphasis on rate rationalisation, and the Reserve Bank of India’s continued monetary liquidity support are designed to stimulate discretionary consumption, said Axis Securities.

"Automobiles, being one of the most tax-sensitive and credit-dependent discretionary purchases, stand to be a major beneficiary, especially in the two-wheeler (2W) and lower-cc passenger vehicle (PV) segments. We believe these factors make the automobile sector poised for re-rating," Axis Securities said. 

This brokerage has upgraded Maruti from 'Hold' to 'Buy' with a revised target of Rs 16,425/share. It also maintained 'Buy' ratings on TVS Motor and Hero MotoCorp with a revised target price of Rs 3,810 and Rs 5,960 per share, respectively.

Kotak Institutional Equities said the GST reset for the auto sector came broadly in line with ts expectations, with rates unified at 18 per cent across most segments and 40 er cent for larger PVs. Assuming a full passthrough, it expects an on-road price reduction of 2-9 per cent across most segments. 

"HMCL, TVS Motors and EIM, along with M&M, MSIL and HMIL, stand to benefit the most among OEMs," Kotak said. 

 M&M is seen as ajor beneficiary, with all the changes being a positive for the company, For MSIL, the change in GST for the small car segment is positive as the company is the largest manufacturer of small cars. TVS is set to benefit from the GST reduction for 2Ws. Eicher Motors may also benefit from the rate changes for

JM Financial said the auto sector has been grappling with two main challenges: Affordability, and liquidity. Both the government of India and the Reserve Bank of India (RBI) have, in recent policy decisions, tried to address both these concerns through GST rationalisation and monetary easing, it said.