Indian equity markets endured a brutal week of selling that culminated on Friday, January 9, marking the worst weekly performance since September. The five-day sell-off wiped out ₹15 lakh crore from the market capitalisation of BSE -listed companies, with Friday alone accounting for ₹6 lakh crore in losses.

Nifty 50 Hits Two-Month Low

The benchmark Nifty 50 index tumbled to its lowest level in two months as selling pressure intensified across the board. The week's performance was particularly damaging, with 35 out of 50 index constituents ending in the red.

Banking Giant HDFC Bank Leads Decline

HDFC Bank emerged as the biggest casualty among heavyweight stocks, posting its worst weekly performance since January 2024. The banking giant alone shed over ₹1 lakh crore in market capitalisation during the week, highlighting the severity of the sell-off in financial stocks.

Broader Markets Mirror Weakness

The carnage extended well beyond large-cap stocks, with mid and small-cap indices bearing the brunt of selling pressure. Both segments recorded their worst weekly performance in months.

Sectoral Rout Across All Indices

No sector was spared from the week's selling pressure, with all sectoral indices posting losses. The Nifty Energy index led the decline with a 5% drop, marking its worst weekly performance since February of the previous year when it had fallen 7%.

Key Sectoral Performance:

• Nifty Energy: Down 5% (worst week since February 2024)
• Nifty Metal: Declined 2-3% (all but one constituent in red)
• Nifty Realty: Fell 2-3% (all but one constituent posted losses)
• Nifty Auto: Down 2-3% overall, with exceptions including Eicher Motors and Bajaj Auto

In the auto sector, while Eicher Motors and Bajaj Auto managed to outperform, other constituents declined between 0.40% and 5.50% for the week.

Earnings Season Ahead

The market's attention now turns to the upcoming quarterly results season, which begins next week. Key announcements include TCS and HCLTech reporting on Monday, while index heavyweight Reliance Industries is scheduled to announce results on Friday. These earnings could provide crucial direction for market sentiment following this week's sharp decline.

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.