Nomura Picks Top Auto Stocks: Mahindra & Mahindra, Hyundai India Among Favorites, Maruti Suzuki Rated Neutral

International brokerage Nomura has updated its recommendations for key players in the Indian auto sector, identifying three stocks with significant potential. The firm's strategy focuses on drivers such as the increasing demand for Sport Utility Vehicles (SUVs), the anticipated boost from festive season sales, and the impact of new product launches.

Mahindra & Mahindra Limited is Nomura's top Original Equipment Manufacturer (OEM) pick. The brokerage forecasts Mahindra & Mahindra's SUV segment to grow at a robust 18% for FY26, 11% for FY27, and 7% for FY28, attributed to premiumisation trends and a strong product cycle. The company is set to launch more Battery Electric Vehicles (BEVs), Internal Combustion Engine (ICE) models, and potentially Hybrid vehicles in the next two years. Approval for Production Linked Incentive (PLI) for BEVs is expected to provide a strategic edge. The strong reception of the new Bolero and positive festive season demand further support this outlook. Nomura has raised its target price for Mahindra & Mahindra Limited to ₹4,355, suggesting a potential upside of 22% from current levels.

Hyundai Motor India is also favored with a 'Buy' rating. Nomura believes the new generation Venue, recently launched at an introductory price of ₹7.90 lakhs, will be a key catalyst for growth in the compact SUV market, with improved margins expected. The brokerage projects 12% year-over-year (YoY) growth in the first five months of FY26, contrasting with 3% YoY growth until October 2025. While the ramp-up of the new Pune plant might create near-term margin pressure, higher exports and a better product mix are anticipated to bolster overall profitability. SUVs currently constitute 71% of Hyundai Motor India's sales, and the refreshed Venue is expected to help sustain market share gains through FY26–27. The target price for Hyundai Motor India is set at ₹2,833, implying an 18.3% upside.

Maruti Suzuki India Limited has been assigned a 'Neutral' rating. Nomura anticipates a 5% increase in Average Selling Prices (ASPs), driven by a more favorable product mix including Compressed Natural Gas (CNG) variants and parts. While the company guides for 6% industry growth, Nomura's FY26 domestic volume forecast is revised between -3% and +3% YoY, expecting a stronger 10% growth in the second half of FY26 (H2 FY26). Domestic growth is projected at 8% for FY27 and 5% for FY28, with export volumes revised upwards by 4% to 432,000 units.

Margins for Maruti Suzuki India Limited are expected to improve in H2 FY26 due to reduced discounts and operating leverage. The strong pent-up demand and aggressive pricing are seen as positive for hatchback demand in the short term. However, Nomura notes that sustained higher growth in the SUV segment could put pressure on Maruti Suzuki India Limited's market share in the medium term. The 'Neutral' rating comes with a target price of ₹16,956, indicating a modest 4.8% upside.

Impact: This news is highly relevant for investors in the Indian stock market as it provides insights from a major brokerage firm on leading auto companies, including specific buy/sell recommendations and price targets. This can influence investor sentiment and trading decisions for these stocks. The focus on SUV growth, EVs, and new launches highlights key trends shaping the automotive industry. Impact Rating: 7/10

Difficult Terms: * OEM (Original Equipment Manufacturer): A company that manufactures products that are then sold to other companies, or under its own brand. * SUV (Sport Utility Vehicle): A type of vehicle that combines features of passenger cars with features of off-road vehicles. * BEV (Battery Electric Vehicle): An electric vehicle that runs solely on battery power. * ICE (Internal Combustion Engine): An engine that generates power by burning fuel, such as petrol or diesel. * PLI (Production Linked Incentive): A government scheme designed to encourage domestic manufacturing and attract foreign investment by providing financial incentives linked to production volumes. * ASPs (Average Selling Prices): The average price at which a product is sold over a specific period. * YoY (Year-over-Year): A method of comparing financial data from one period to the same period in the previous year. * H2 FY26 (Second Half of Financial Year 2025-2026): Refers to the period from October 2025 to March 2026. * Operating leverage: A situation where a company's costs do not increase proportionally with its revenue, leading to higher profit margins as sales grow.