Report suggests earnings leadership shift in India's auto sector by FY28

A report by Systematix Institutional Equities suggests that earnings leadership in India's automobile sector could shift between FY26 and FY28. The report notes that rising raw material costs and slowing demand growth are putting pressure on profitability. It views FY27 as a period of normalization, as the volume boost from GST-related measures moderates.

The sector is moving away from a post-pandemic recovery focused on profit margins toward a phase where sustainable earnings growth is the key metric. The report highlights that stock performance has historically depended more on stable margins and efficient capital utilization than on sales volumes alone.

The Nifty 50 Index recently rallied, driven by FPI returns and strong corporate earnings, led by the IT and Auto sectors.