The momentum in the auto sector is likely to continue into 2026: Dipan Mehta

The latest car sales figures have investors optimistic as industry experts point to strong growth driven by recent VAT cuts. Dipan Mehta, director of Elixir Equities, said: “There were some good numbers coming out of the auto industry and the VAT cuts have clearly benefited auto volumes across the board. And more importantly, management is also sounding very positive about double-digit growth rates for the rest of the year. So this particular VAT cut has certainly been a big trigger for auto volumes which are more or less stagnant.”He added that Maruti Suzuki, M&M and TVS Motors were among the standout players, highlighting that operating profit margins are likely to improve on the back of better operating leverage and favorable raw material costs. “These are great times for the auto industry. I haven’t seen this kind of volume growth for a long time and the December quarter numbers will certainly be impressive and these stocks may still have some strength left to recover even from these levels,” Mehta said.

On the IPO market, Mehta discussed the recent sale of promoter blocks in Bajaj Housing and Bank of Maharashtra. He noted that while some overhangs remain, the broader impact on stock prices has been limited. “When Bajaj Housing went public, we were also aware that at some point we should expect promoters to sell… But over the course of the day, the money flows back to Bajaj Finance. So as a shareholder of Bajaj Finance as a benchmark for disclosure, it is quite positive from that point of view,” he explained.

He cited examples of other stocks such as Whirlpool and IndiGo where promoter sales did not hinder long-term returns. Mehta emphasized that responsible and well-timed divestments, coupled with deep-pocket investors absorbing large volumes, will help maintain market stability.

Looking ahead, Mehta remains optimistic about both the auto and agriculture sectors. He noted: “You may have missed it, but VST Tillers also reports its monthly figures, although not exactly on cars, but certainly on agricultural equipment, and those figures are quite impressive too. The GST cut has acted as a big trigger for the car companies… Looking forward to the good numbers for the December quarter.”

With festive demand and the upcoming wedding season, analysts expect the momentum to continue into 2026, supported by new models and continued consumer interest. Investors will keep a close eye on the December quarter results, which are expected to confirm the sector’s growth trajectory.