Hero Moto, M&M, others tumble up to 2%, dragging Nifty Auto after a three-day rise

Auto Stocks Skid After Brief Rally

After enjoying a three-session climb, the Nifty Auto index came under pressure on Monday, June 23, with leading auto stocks such as Hero MotoCorp, Mahindra & Mahindra (M&M), Eicher Motors, and Tata Motors witnessing a collective downturn of up to 2%. The reversal in sentiment weighed on broader auto sector optimism, with the Nifty Auto index slipping 1.3% in intraday trade.

Hero MotoCorp led the declines, falling over 2%, while M&M dipped by 1.8%, and Eicher Motors slid by nearly 1.5%. Other notable laggards included Bajaj Auto and Ashok Leyland. The pullback follows a strong uptrend driven by favorable monsoon projections, rural demand recovery, and pre-festival season stocking optimism.

Sector Rotation and Profit Booking at Play

Market participants attributed the fall largely to profit booking after the recent three-day rally that saw auto stocks surge by over 4% in aggregate. Analysts flagged sectoral rotation and macro-driven caution as investors shifted focus to FMCG and IT counters amidst global volatility.

“Auto stocks had a good run over the past few sessions, pricing in optimism around demand recovery and easing input costs. What we’re seeing now is healthy consolidation,” said Ajay Bagga, market expert and former fund manager. “With the broader market turning defensive, cyclical counters like auto are witnessing some rotation-driven exits.”

Adding to the nervous sentiment, rising crude oil prices and concerns over interest rate outlook in the US also cast a shadow on near-term demand prospects for the auto sector.

Domestic Indicators Still Supportive

Despite the day’s correction, domestic cues continue to remain largely supportive for Indian automakers. Retail sales, as per FADA data, saw a 7% year-on-year increase in May, driven by improving two-wheeler and passenger vehicle sales. The government’s thrust on infrastructure, the rural economy, and EV adoption also provide a longer-term tailwind.

Moreover, with the Reserve Bank of India holding rates steady and inflation moderating, credit availability remains benign—beneficial for both consumers and the industry.

“Auto fundamentals have improved, especially in the rural two-wheeler segment. This pullback is technical in nature and should not be interpreted as a reversal in trend,” said Ruchit Jain, Lead Research Analyst at 5paisa.

Global Factors Temper Sentiment

On the global front, uncertainty around the U.S. Fed’s next rate action, soft demand trends in China, and supply chain bottlenecks in EV components remain key overhangs. Auto stocks are particularly sensitive to macroeconomic shifts due to their capital-intensive nature and high correlation with interest rate cycles.

“Higher bond yields in the U.S. and a stronger dollar are putting pressure on emerging market equities, especially in cyclical segments like autos. Traders are responding to that global recalibration,” noted Ankita Shah, VP of Global Strategy at JM Financial.

Nifty Auto Outlook: Short-Term Caution, Long-Term Promise

The Nifty Auto index has outperformed the benchmark Nifty 50 in the year-to-date performance, buoyed by improved earnings visibility, strong export growth, and rising EV penetration. With the index still up over 18% in 2025, Monday’s fall is being viewed more as a technical breather than a trend reversal.

From an investor standpoint, the dip may offer opportunities to accumulate quality names with robust fundamentals.

“Names like Tata Motors, M&M, and Bajaj Auto remain our top picks. They offer a mix of domestic strength and export potential, especially in EV and SUV segments,” shared Devang Mehta, Head of Equity Advisory at Centrum Broking.

Auto Sector to Watch Amid Market Volatility

While the sector saw a momentary slip on June 23, the medium- to long-term outlook for India’s automobile industry remains positive. As the festive season approaches and rural indicators continue to improve, investor attention will likely return to auto counters, especially in the two-wheeler and SUV segments.

Short-term volatility is expected to persist amid global uncertainty and sectoral rotation, but the larger trajectory remains supported by structural drivers including electric mobility, rural recovery, and favorable policy initiatives.