Hero MotoCorp, M&M, other auto stocks drop up to 5% despite strong August sales numbers. Should you buy the dip?

Auto stocks experienced a sharp decline of up to 5% on Wednesday, despite reporting strong August sales figures across various segments, excluding tractors. Analysts pointed out that certain companies had outperformed their competitors. While highlighting the risk of potential demand impact from further price hikes, particularly in the mass-market segments due to inflation and rising interest rates, they maintained a cautious outlook.

Shares of Hero MotoCorp plummeted by 5%, while those of Eicher Motors fell over 4%. Other affected stocks included Bajaj Auto, M&M, TVS Motors, and a few others, which saw declines ranging from 1-3%, with Tata Motors PV and Maruti Suzuki shares dropping nearly 1%. The Nifty Auto index plummeted more than 2% as the top sectoral loser, according to market data.

Passenger vehicle sales in India surged by double-digits in August, with a 36% increase from the previous year, according to industry estimates. Maruti Suzuki India achieved a significant milestone, surpassing the 1 million sales mark in the first five months of the current fiscal year. Tata Motors Passenger Vehicles and Mahindra & Mahindra (M&M) also reported substantial growth in August.

Hyundai Motor India recorded its highest-ever domestic sales for the month. TVS Motor Company experienced an 18% surge in August sales, while Bajaj Auto saw an 10% increase. Eicher Motors' Royal Enfield led premium segment growth at 11%. Nomura and Motilal Oswal, two prominent brokerages, provided their insights on auto stocks, with Nomura expecting industry growth to moderate in the second half of FY27, favoring companies with EV and new model exposure.

Both brokerages maintained a positive stance on select companies, with Motilal Oswal naming Maruti Suzuki, TVS Motors, and M&M as their top OEM recommendations.