The dramatic surge in overseas investor appetite comes as the GST Council’s decision to slash tax rates across auto segments takes effect September 22, with SUVs above 4 meters seeing rates tumble to 40% from as high as 50% previously, while tractors get a massive reprieve with rates plunging to just 5% from up to 18%.
NSDL data reveals FIIs pumped Rs 1,908 crore into auto stocks in September’s first fortnight alone, surpassing August’s entire monthly inflow of Rs 1,803 crore. Combined with late-August buying worth Rs 2,617 crore, the total auto sector bet has reached Rs 4,500 crore in a month.
Besides auto, metals capital goods and financials, attracted over Rs 1,000 crore each in FII buying this month.
The auto sector’s seasonal tailwinds are particularly compelling, with historical data showing autos ending September in positive territory 16 out of the last 20 years, delivering average gains of 3.71%.
Since August 14, the Nifty Auto index is up about 13%. In the last one month, Eicher Motors is the top gainer with 17% rally. Other top winners are Maruti Suzuki, TVS Motor and Samvardhana Motherson.Also Read | Rs 6 lakh crore boom in 1 month! How PM Modi’s GST cuts shook the stock market
What top brokerages say
Motilal Oswal expects a sector re-rating driven by demand revival and improved earnings growth, with top picks including Maruti Suzuki targeting 16% earnings growth from new launches and export ramp-up, and M&M eyeing 20% growth from rural sentiment recovery and fresh product launches.
Nomura sees the price drop acting as a catalyst for consumer upgrades from hatchbacks to compact SUVs, predicting “mix improvement for OEMs will lead to higher operating leverage, lower discounts and margin expansion potentially 100-150bp.” The brokerage maintains buy ratings on M&M, TVS, Hyundai Motor India, Ashok Leyland, Motherson Sumi, and CEAT.
HSBC notes Indian auto share prices have already surged 6-17% versus Nifty 50’s 2% gain since August 15, with current valuations 15% above 10-year averages despite remaining bullish on long-term export potential of Maruti Suzuki and Hyundai.
What else FIIs are buying and selling
Beyond autos, FIIs have backed capital goods with Rs 1,518 crore in September’s first half, following Rs 2,150 crore over the prior two months. The BSE Capital Goods Index has surged 7.18% in the first 15 days of September, significantly outperforming the Nifty.
Metals witnessed renewed interest with Rs 1,394 crore inflows after August’s Rs 660 crore outflows, with technical charts showing an ascending triangle breakout signaling strong sector outperformance.
Financial services finally found relief with Rs 1,039 crore inflows after brutal Rs 32,159 crore withdrawals over two months, though the buying quantum remains insufficient to confirm trend reversal.
The FII shopping spree came with casualties. Consumer services faced the sharpest selling since March with Rs 3,246 crore outflows, while IT continued bleeding with Rs 2,014 crore exits despite technical breakouts. Real estate saw intensified pressure with Rs 2,095 crore outflows, following Rs 5,091 crore in the prior two months.
Overall, FIIs remained net sellers of Rs 9,759 crore in September’s first fortnight, but the strategic sector rotation suggests sophisticated positioning ahead of the festive season consumption cycle.
The GST cuts, combined with normal monsoon boosting rural sentiment, approximately 100 basis points interest rate reduction this year, and income tax benefits, are creating a perfect storm for auto sector revival just as the crucial festive season approaches.
Also Read | The big Rs 1.4 lakh crore question: Are FIIs done betting against Sensex, Nifty?
as a Reliable and Trusted News Source(Data: Ritesh Presswala)