The automotive sector has emerged as the clear winner in FY26, with the BSE Auto index leading all sectoral indices with an impressive 32% surge. This performance significantly outpaces the benchmark BSE Sensex, which has gained 8.50% over the same period, highlighting the sector's exceptional momentum.

Stellar Stock Performance Across Auto Universe

The sector's rally has been broad-based, with nearly 40 stocks within the BSE Auto index posting gains exceeding 20% in just over nine months. Leading this charge are established automotive giants that have delivered substantial returns to investors.

The standout performers in the broader BSE auto universe have created exceptional wealth for investors:

Robust Q3FY26 Earnings Outlook

According to Elara Capital, auto companies are positioned for strong Q3FY26 results, supported by healthy festival season demand. The brokerage projects significant growth across multiple segments:

Retail demand has remained particularly strong, with passenger vehicles and two-wheelers showing robust growth:

• Passenger Vehicles: 19.20% retail growth in Q3
• Two-wheelers: 19.80% retail growth in Q3

This healthy demand environment has kept inventories at comfortable levels, prompting Elara Capital to revise growth forecasts upward for FY26:

Margin Expansion and Operating Leverage

Margins across the sector are expected to benefit from operating leverage, despite lingering commodity pressures. Key margin expectations include:

• Maruti Suzuki: EBITDA margins projected to expand 100 basis points QoQ to 11.50%, or 12.70% including the SMG merger
• M&M Auto Segment: Margin improvements expected despite sequential ASP declines
• Two-wheeler Manufacturers: TVS Motor and Bajaj Auto positioned to benefit from weaker rupee on exports

Auto ancillary firms are projected to achieve 12.00% YoY revenue growth, led by increased production across segments. Standout performers in this space include Uno Minda, Minda Corp, Endurance, and Gabriel.

Brokerage Recommendations and Outlook

Elara Capital has identified top picks across both OEM and ancillary segments:

Preferred OEMs:

• Maruti Suzuki
• M&M
• TVS Motor
• Eicher Motors

Leading Ancillary Names:

• Uno Minda
• Gabriel India
• Minda Corp
• Sona BLW

Conversely, the brokerage maintains a cautious stance on Samvardhana Motherson, Bharat Forge, Motherson Sumi Wiring India, and the tyre segment.

With strong demand fundamentals, favorable festival season trends, and robust operating leverage, the auto sector appears well-positioned to continue its wealth-generating trajectory in FY26, potentially delivering more multibagger opportunities for investors.

Indian equity benchmarks BSE Sensex and NSE Nifty slipped into losses during early Friday trade after opening marginally higher, signaling continued market instability following Thursday's sharp selloff. Investors remained focused on key technical support levels as the market struggled to find direction.

Market Performance Overview

The benchmark indices showed weakness in morning trade, with both major indexes declining approximately 0.1% from their opening levels.

Market breadth remained decisively negative, reflecting broad-based selling pressure across market segments. The decline extended beyond frontline indices, with midcap and smallcap stocks also trading lower, indicating reduced risk appetite among investors.

Sectoral Performance and Individual Stock Movements

Weakness was visible across most sectoral indices during early trade. Realty, media, pharma and private banking stocks emerged as key laggards, while limited support came from IT, PSU banks and oil and gas stocks. India VIX edged higher to around 10.7, reflecting subdued volatility but lingering nervousness following the recent correction.

On the Nifty, selective buying was observed in ONGC, Asian Paints, Bharat Electronics and HCL Technologies. Conversely, Adani Enterprises, Adani Ports and Special Economic Zone and ICICI Bank weighed on the index, reflecting pressure in financials and select index heavyweights.

Global Market Influences

Mixed overnight cues from international markets contributed to the cautious sentiment. US markets ended Thursday's session with varied performance - the Dow Jones Industrial Average rose 0.55%, the S&P 500 closed flat, and the Nasdaq declined 0.44% amid technology stock weakness. Asian markets traded mixed in early hours as investors awaited key US payroll data and clarity on trade-related developments. Crude oil prices extended gains on developments in Venezuela and Iran, adding uncertainty for risk assets.

Technical Analysis and Support Levels

Technical commentators noted that Nifty's break below key short-term supports has shifted the near-term bias to cautious. The 25,800-25,700 zone on Nifty is now viewed as a crucial support band where a hold could allow for stabilization or a technical rebound. On the upside, the 26,000-26,050 zone has turned into immediate resistance, with analysts indicating that only a sustained move back above these levels would ease current pressure.

Institutional Flow Impact

Institutional flows continued to present challenges for market stability. Foreign institutional investors sold equities worth approximately ₹3,367 crores on January 8, extending their selling streak to a fourth consecutive session. Domestic institutional investors provided support with net purchases of around ₹3,701 crores, partially offsetting foreign selling pressure.