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Auto Stocks Today: Auto stocks were mixed in Tuesday’s trade after global brokerage Morgan Stanley revised its outlook on key names in the sector, flagging GST rationalisation, monetary easing, and the 8th Pay Commission as major demand tailwinds. At 10:42 am, shares of Eicher Motors were up 0.57 per cent at Rs 6,854, while Hero MotoCorp traded marginally higher at Rs 5,444. Meanwhile, Bajaj Auto slipped 0.49 per cent to Rs 9,387.50, following a downgrade from the brokerage.
The Nifty Auto index was down 0.38 per cent at 27,086.25, underperforming the broader market amid stock-specific reactions.
Brokerage Calls: Morgan Stanley Adjusts Ratings on Auto Stocks
Eicher Motors: Upgraded to ‘Equalweight’, with the target price raised to Rs 7,201. The firm cited improved profitability visibility and a strong premium motorcycle outlook.
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Hero MotoCorp: Also upgraded to ‘Equalweight’, with the target price revised to Rs 5,968, based on improving rural demand and better cost dynamics.
Bajaj Auto: Downgraded to ‘Underweight’, with a revised target of Rs 8,075, citing valuation concerns and limited upside after the recent rally.
What’s Driving the Brokerage Views on Auto Stocks
Morgan Stanley believes auto prices could see deep cuts if the government goes ahead with GST slab rationalisation, possibly resulting in a tax structure that’s more favourable to consumers. Combined with expectations of monetary easing and increased household income from the 8th Pay Commission, the brokerage anticipates a supportive macro environment for the sector.
Interestingly, it also highlighted that auto stock multiples usually peak around peak margins, but this time, margins could surprise on the upside, offering room for further re-rating.
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