Morgan Stanley has said that GST rationalisation could trigger auto price cuts of a scale Indian consumers have never seen before, potentially transforming demand dynamics across the sector. Combined with monetary easing and the likely boost from the upcoming 8th Pay Commission, the brokerage expects a strong recovery in consumption, with margins also surprising on the upside.
It noted that in past cycles, auto sector valuations peaked around peak margins, and said a similar setup may now be in play. Morgan Stanley highlighted that Mahindra & Mahindra, TVS Motor, and Eicher Motors have already been gaining market share, and price cuts could accelerate this trend further.
Reflecting its optimism, the brokerage upgraded Eicher Motors to equal-weight with a raised target price of ₹7,201 per share and upgraded Hero MotoCorp to equal-weight with a higher target price of ₹5,968. On the other hand, it downgraded Bajaj Auto to underweight with a target price of ₹8,075, citing a relative preference for peers that stand to gain more meaningfully from the upcoming shifts.
Disclaimer: The views and recommendations made in this article are those of Morgan Stanley. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
