TVS and Bajaj Auto top Elara’s list as two-wheeler demand picks up

Elara Capital expects India’s two-wheeler industry to grow at a faster clip than passenger vehicles (PVs) and commercial vehicles (CVs) in financial year ending March 2026, driven by rural recovery and healthy festive demand.“We remain positive on the two-wheeler space and our pecking order would be TVS Motor and Bajaj Auto,” said Jay Kale, Executive Vice President – Research at Elara Capital.

The brokerage expects two-wheelers industry to grow at 7% this year, and with rural demand picking up, the tractor segment could also emerge as an outperformer.

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Kale, however, flagged concerns around elevated valuations across auto stocks following the recent rally. Current stock prices already reflect expectations of a festive season recovery, even though demand has been relatively weak in the first three to three and a half months of the fiscal year.

Vahan retail data has also shown sluggish trends. While policy measures like income tax rate cuts may help revive demand in the coming months, Elara Capital believes it’s prudent to focus on companies with limited downside risk to earnings.

On the electric vehicle front, Elara Capital does not foresee a significant impact on Mahindra & Mahindra from Tesla’s India entry at the current price point. With the Model Y being launched at an ex-showroom price of ₹59.89 lakh, the firm believes the model will remain out of reach for the mass market and thus not pose a competitive threat to Mahindra.

The brokerage continues to remain constructive on Mahindra, citing the company’s consistent double-digit growth despite weak industry conditions and the continued resilience of its tractor business. While news around Tesla may cause temporary volatility in Mahindra’s stock, Elara believes the situation has now stabilised with clarity on Tesla’s pricing strategy.

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