Two-wheeler retail sales during the Navratras grew by a mid-to-high single digit across regions even as rural sales have remained muted, a brokerage firm said in a report on the automobile sector on Thursday.

The report by Motilal Oswal Financial Services also said that during the last week of October, inquiries and bookings are seeing a slight improvement for passenger vehicle OEMs (original equipment makers), especially Maruti Suzuki and Tata Motors.

“We observed varied demand trends in October, with two-wheelers and tractors showing positive momentum and passenger and commercial vehicles witnessing moderate demand. A better monsoon is helping drive positive sentiments in rural regions, though the sustainability of this demand remains to be seen,” the brokerage firm said.

Overall, two-wheelers performed better, with festive growth expected at 4-5 per cent year-on-year, partially constrained by a high base, it said.

At the same time, passenger vehicles may see a fall in the festive season compared with last year, it said, adding that inventory levels are currently high for both two-wheelers and passenger vehicles, making Diwali sales a critical period to gauge inventory clearance.

Tractor volumes are recovering and are expected to perform well in the second half of the current financial year. In commercial vehicles, sentiment improved sequentially, driven by demand in certain industries, though a full recovery remains distant, it stated.

Overall, the brokerage firm said, it expects dispatch growth for two-wheelers and tractors at 12 per cent and 2 per cent, respectively, while for the three-wheelers at 5 per cent.