Auto stocks on fast track in FY26; two have already doubled investors’ wealth

The BSE Auto index is racing ahead in FY26, emerging as the top-performing sector among BSE sectoral indices. The index has surged 32 per cent so far, outpacing all sectoral indices and trading much higher compared with the benchmark BSE Sensex, which has gained 8.5 per cent over the same period.Within the BSE Auto index, nearly 40 stocks have posted gains of over 20 per cent in just over nine months. Leading the rally are marquee names such as Ashok Leyland, Hero MotoCorp, TVS Motor Company and Maruti Suzuki India, which have surged 40–80 per cent, delivering substantial returns to investors.Looking at the broader BSE auto universe, the standout performers are SML Mahindra and Force Motors, which have skyrocketed 185 per cent and 121 per cent, respectively, creating multibagger wealth for investors in a remarkably short span.

Strong Q3FY26 earnings outlook:

Auto companies are poised to post robust results in Q3FY26, according to Elara Capital. The brokerage expects revenue for auto OEMs, excluding Tata Motors, to rise around 29 per cent YoY and 14 per cent QoQ, fuelled by double-digit volume growth across segments driven by a healthy festival season. Auto ancillary revenue is also expected to grow 12.3 per cent YoY.Demand remains strong for passenger vehicles and two-wheelers, with retail growth of 19.2 per cent and 19.8 per cent, respectively, in Q3. This healthy demand has kept inventories comfortable, prompting Elara Capital to revise passenger vehicle growth for FY26 to 8 per cent, up from 5 per cent, while maintaining the two-wheeler growth forecast at 9 per cent. Medium and heavy commercial vehicles and light commercial vehicles are also seeing upward revisions to 9 per cent and 11 per cent, respectively, while tractors continue to outperform with projected growth of 19 per cent YoY.Margins are expected to benefit from operating leverage, even as commodity pressures linger. Maruti Suzuki could see EBITDA margins expand 100 bps QoQ to 11.5 per cent or 12.7 per cent including the SMG merger, supported by a stronger mix of high-value models. M&M’s auto segment may see margins improve despite sequential declines in ASPs due to a weaker BEV mix.Two-wheeler makers such as TVS Motor and Bajaj Auto stand to benefit from a weaker rupee on exports, although Royal Enfield may see a slight ASP contraction of around 1 per cent QoQ. Auto ancillary firms are projected to see revenue growth of 12 per cent YoY, led by production across segments, with standout performers including Uno Minda, Minda Corp, Endurance and Gabriel.

Top picks and outlook:

Elara Capital’s top picks among OEMs include Maruti Suzuki, M&M, TVS Motor and Eicher Motors, while leading ancillary names are Uno Minda, Gabriel India, Minda Corp and Sona BLW. Conversely, the brokerage maintains a cautious stance on companies such as Samvardhana Motherson, Bharat Forge, Motherson Sumi Wiring India and the tyre segment.

With strong demand, favourable festival season trends and robust operating leverage, the auto sector looks set to remain a wealth generator in FY26, potentially producing more multibaggers along the way.