Why Maruti Suzuki India shares jumped 5% in afternoon trade

Shares of Maruti Suzuki India Ltd witnessed a sharp rally in Thursday's afternoon trade, surging 5.02 per cent to hit an intraday high of Rs 13,917.75. The stock was last trading 3.93 per cent higher at Rs 13,773.20. Despite today's gain, it is still down 17.60 per cent on a year-to-date (YTD) basis.

The stock attracted strong buying interest during the session, emerging as one of the top gainers in the automobile sector.

Ravi Singh, Chief Research Officer at Master Capital Services, said, "The biggest reason behind the rally was the sharp fall in crude oil prices after geopolitical tensions eased in the Middle East. Lower crude prices are generally positive for automobile companies as they help improve consumer sentiment and can encourage higher vehicle demand."

He added, "Apart from this, investors also remained optimistic about Maruti's strong position in the passenger vehicle segment and its continued focus on cleaner mobility solutions such as CNG and flex-fuel vehicles. The company is expected to benefit from improving demand conditions if fuel prices remain stable."

Singh further said, "Overall, easing crude oil prices, positive outlook for the auto sector and confidence in Maruti's long-term growth prospects attracted fresh buying interest."

Maruti has launched India's first flex-fuel passenger vehicle in the Wagon R variant, a move that has attracted attention amid the evolving automobile landscape. The launch comes as the industry continues to explore alternative fuel technologies and ethanol-based mobility solutions.

The country's largest carmaker said a flex-fuel car gives customers the flexibility to run on any blend of ethanol and petrol from E20 to E100. However, it clarified that while the vehicle is compatible with E100 fuel, it is homologated with E85 fuel since the Central Motor Vehicle Rules, 1989 (CMVR) GSR 27(E) defines flex fuel as E20 to E85.

Calling the new flex-fuel vehicle launch a positive move, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, stated, "Maruti understands the entry-level segment and its product positioning. Flex-fuel is likely to be a focus area in the coming quarters and beyond. This could be a game changer for Maruti in this segment from a product-offering perspective."

Meanwhile, oil prices extended their decline on Thursday, falling to levels seen before the onset of the US-Iran conflict, as expectations of increased crude supply from West Asia outweighed concerns over demand.

At last check, Brent crude futures dropped $1.41 or 1.91 per cent to $72.33 per barrel, while US West Texas Intermediate (WTI) crude fell $1.18 or 1.68 per cent to $69.16 per barrel.