Auto stocks like Tata Motors, Bajaj Auto, Mahindra & Mahindra, and TVS Motors are trading at their respective 52-week highs. In fact, the Nifty Auto index is now up 17 percent this year and has declined only in three trading sessions since May 9.

Stocks like Tata Motors and Bajaj Auto are among the top performers on the Nifty 50 index in 2023, while those of Mahindra & Mahindra along with Maruti Suzuki have also seen healthy double-digit gains so far on a year-to-date basis.

Additionally, most of the auto names like Royal Enfield-maker Eicher Motors, Hero MotoCorp, M&M and Maruti continue to trade below their 10-year average valuation multiple.

The recent surge in Auto stocks comes on the back of a resurgence in sales figures for the month of May. As per data provided by the Federation of Automobile Dealers Associations (FADA), the retail sales saw growth of 10 percent from last year in May.

The growth in the passenger vehicle (PV) industry has been aided by improved availability of vehicles, strength of pending orders, and robust demand for new launches. The segment is further expected to grow on the back of a slew of new launches in June.

Major new launches under the PV segment in June include Maruti Suzuki’s Jimny, Honda’s Elevate, Volkswagen’s Virtus and Taigun, and Mercedes’ SL55 Roadster.

The retail sales of Jaguar Land Rover of Tata Motors have shown substantial improvement in April 2023, thereby further aiding sentiment on the stock. Another key trigger for Tata Motors is the Tata Group's ambitious electric vehicle battery plant deal in Gujarat for which it is making investments to the tune of $1.6 billion.

"Last five years, Maruti has been consolidating, and from earnings perspective, this stock is available at cheapest in what we have seen in last five years. We have been suggesting aggressively to buy Maruti to our clients, we have aggressive target prices of more than Rs 11,000 in Maruti so, even after decent upmove in Maruti, this this stock warrants to be in your portfolio from the auto space," Siddharth Bhamre of Religare Broking said on June 1. He also sees room for upside in stocks like Eicher.

"I do agree that many stocks are at a 52-week high and so on, but we still like the four wheelers space quite a bit," said Abhiram Eleswarapu of BNP Paribas. He prefers the four-wheeler stocks over their two-wheeler peers.