Nifty Auto tumbles 15% in 2026 despite record sales: Should investors worry or buy dip in auto stocks?

India’s automobile sector has come under sharp pressure in recent weeks despite strong sales momentum, with the Nifty Auto witnessing a steep correction amid global uncertainty and margin concerns.

The auto index is currently at 24,186.65, down 911.35 points or 3.63 per cent on Friday. The decline has been sharper over a slightly longer period. The index has fallen 10.68 per cent in the past week, 14.34 per cent over the past month, and 15.08 per cent so far in 2026.

This performance indicates that auto stocks are underperforming the broader Nifty 50, which has declined around 9.5 per cent year-to-date.

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The sharp fall has been driven by global geopolitical tensions, rising commodity prices, concerns over production disruptions and a possible slowdown in demand growth. At the same time, the correction comes even as the industry continues to report strong wholesale and retail sales data.

Auto stocks see broad-based fall

Most major auto stocks have declined sharply in recent trading sessions.

Shares of TVS Motor Company have fallen 12.25 per cent in the past week, 14.08 per cent over one month, and 12.49 per cent year-to-date.

Mahindra & Mahindra has declined 11.92 per cent in one week, 16.93 per cent in one month, and 21.96 per cent in 2026 so far.

Shares of Maruti Suzuki India have dropped 11.17 per cent in one week, 17.45 per cent over the past month, and 24.72 per cent year-to-date, making it one of the worst performers among large auto companies.

Hyundai Motor India has seen relatively lower declines, with the stock down 3.80 per cent in one week, 7.56 per cent in one month, and 12.81 per cent year-to-date.

On Friday, most auto stocks were also in the red. TVS Motor, Bosch, Mahindra & Mahindra, Bajaj Auto, Eicher Motors, Maruti Suzuki, and Hero MotoCorp were down between 3 per cent and 3.5 per cent, while companies such as Bharat Forge, Motherson, Uno Minda, and Sona Comstar declined between 4 per cent and 5.4 per cent.

Macquarie warns of growth and margin risks

Macquarie has warned that macroeconomic uncertainty could affect growth prospects for the auto sector.

The brokerage said retail sales and production have remained strong so far in FY26, but risks are now emerging around demand and margins. According to Macquarie, the firm had earlier been constructive on the sector based on expectations of healthy demand and improving margins.

However, rising global uncertainty and margin pressures could lead to Indian auto stocks underperforming the broader market in the near term.

JPMorgan highlights geopolitical and supply risks

JPMorgan said the auto sector faces a combination of risks due to geopolitical tensions and rising commodity prices. The brokerage said shortages of gas such as LNG and LPG could lead to production disruptions or temporary shutdowns at manufacturing facilities.

Potential disruptions to CNG availability at fuel pumps could also influence consumer preferences. Higher fuel costs may reduce vehicle demand, while rising commodity prices could increase production costs and affect margins.

In addition, global shipping disruptions may impact vehicle exports, while weakening consumer sentiment could slow the recovery seen after GST-related tax reductions.

Despite these risks, JPMorgan noted that March 2026 retail vehicle volumes remain strong for now. The brokerage also highlighted that some auto stocks have corrected back to levels seen before GST tax cuts.

Within the sector, JPMorgan prefers Maruti Suzuki India, Mahindra & Mahindra, and Hyundai Motor India because of relatively better growth visibility and valuations.

Jefferies sees strong industry growth

Jefferies said the Indian auto industry recorded strong growth in February. The brokerage estimates that wholesale dispatches increased 31-38 per cent year-on-year for two-wheelers, trucks and tractors, while passenger vehicle wholesales rose around 10 per cent.

Vehicle registrations also increased 25-41 per cent across segments, indicating strong retail demand. According to Jefferies, February wholesale growth for individual companies included:

Jefferies ratings and upside potential

Based on current market prices and Jefferies target prices, potential upside or downside for several auto stocks is as follows:

The brokerage maintains buy ratings on TVS Motor, Mahindra & Mahindra and Eicher Motors, while recommending hold on Maruti Suzuki and Bajaj Auto and underperform on Hero MotoCorp, Tata Motors PV and Hyundai.

Nomura positive on tractors and M&M

Analysts at Nomura Holdings said the proposed Trem V emission norms for tractors may be delayed, which could benefit Mahindra & Mahindra.

The delay reduces the risk of sharp cost increases and price hikes that could have affected tractor demand. Nomura expects tractor sales volumes for M&M to grow 24 per cent in FY26, 5 per cent in FY27, and 5 per cent in FY28.

The brokerage maintains a buy rating on Mahindra & Mahindra with a target price of 4,662, implying about 39 per cent potential upside from a CMP of 3,348.

Motilal Oswal positive on Maruti Suzuki

According to Motilal Oswal Financial Services, the recent underperformance in Maruti Suzuki shares is likely due to weak wholesale volumes and disappointing third-quarter results.

However, the brokerage believes these concerns may be overdone because retail demand for Maruti vehicles remains strong, particularly after GST-related tax cuts.

Maruti’s wholesale volumes have been limited by capacity constraints, which are expected to ease from April 2026 when new production capacity becomes operational.

Brokerage Motilal Oswal said Maruti Suzuki India has a strong product pipeline, which includes a new Brezza variant, the recently launched Victoris, the e-Vitara electric SUV, and at least one more new model planned for FY27.

The brokerage expects the company to deliver 16 per cent earnings CAGR between FY25 and FY28 and has maintained a buy rating with a target price of Rs 17,406. Compared with the current market price of Rs 14,388, the target indicates a potential upside of about 21 per cent.

Auto sales remain strong despite the stock correction

Even as auto stocks decline, industry data indicates strong demand. According to the Society of Indian Automobile Manufacturers, India recorded its strongest-ever February wholesale sales in 2026.

Passenger vehicle wholesales stood at 4.18 lakh units, up 10.6 per cent year-on-year.

Two-wheeler wholesales rose 35.2 per cent to 18.71 lakh units, while three-wheeler sales increased 29 per cent to 0.75 lakh units. Retail sales also showed strong growth, according to the Federation of Automobile Dealers Associations.

Overall vehicle retail sales rose 25.62 per cent year-on-year to 24.09 lakh units in February.