Two-Wheeler Stocks Analysis: Sector Growth and Investment Opportunities

The two-wheeler sector has emerged as a standout performer in the automotive space, delivering excellent returns and achieving approximately 11% growth during the year. The sector's strong performance has been supported by demand recovery and favorable government policies, creating sustained growth momentum across the industry.

Sector Performance and Market Dynamics

The year witnessed a notable turnaround in the latter half, primarily driven by GST 2.0 rate rationalization. This policy change reduced taxes on mass-market vehicles, significantly reviving demand across passenger and commercial mobility categories. While other automotive segments experienced sluggish performance in the first half, the two-wheeler segment maintained consistent growth throughout the period.

The market has responded positively to these developments, with strong upward momentum in stock prices across major two-wheeler manufacturers. The sector's resilience and growth potential have attracted significant investor attention.

Valuation Analysis of Major Players

Among the leading two-wheeler manufacturers, valuation metrics reveal significant disparities:

TVS commands the highest valuation at 68x PE, reflecting its leadership position in the electric vehicle category and strong performance in the three-wheeler segment. However, this premium valuation raises questions about entry points for new investors.

Relative Performance Assessment

Eicher Motors has emerged as the best relative performer among major two-wheeler stocks, with TVS following as a close second. Hero ranks third in relative performance, while Bajaj Auto trails in fourth position. Notably, Bajaj Auto has shown a strong rebound in price action, moving from -6% in the first half to 14% growth.

The performance divergence is particularly evident in recovery patterns from recent lows. Hero experienced the maximum volatility, falling approximately 45% to March 2025 lows before recovering 90% subsequently. In contrast, Bajaj Auto fell 40% to March 2025 lows but has managed only a 28% recovery, indicating slower market confidence.

Investment Outlook and Recommendations

The technical analysis reveals different momentum patterns across stocks. Most companies show impulse-like movements, while Bajaj Auto's pattern appears more corrective, suggesting cautious market sentiment despite recent improvements.

Key Investment Considerations:

• Eicher Motors: Continues strong upward momentum with attractive 40x PE valuation
• TVS: Premium valuation at 68x PE may limit new investment opportunities
• Bajaj Auto: Potential catch-up play with room for upside to approximately 10,000 levels
• Hero: Short-term high signals suggest potential consolidation

Eicher Motors appears positioned as the most attractive investment opportunity, combining strong relative performance with reasonable valuation metrics. The company continues its upward trajectory without showing signs of profit-taking, unlike some peers.

Bajaj Auto presents a potential trading opportunity for investors seeking catch-up plays, with possible upside of 5% or more to around 10,000 levels, depending on overall market trends. However, this appears more suitable as a short-term trading position rather than a long-term investment thesis.