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Retail sales of vehicles in India rose in July, a dealers' body said on Monday but cautioned of rising inventory levels and demand slowdown in certain categories despite the upcoming festive period.

Inventory days, an indicator of retail demand, ranged from 50-55 days for passenger vehicles, up from 45-49 days in June, the Federation of Automobile Dealers Association (FADA) said. Higher inventory days indicate dealers storing vehicles for longer before being able to sell them.

"We've seen retail sales growth trail wholesales so far this financial year, and if it were to continue into the festive season, it could be worrying for the industry," said Rishi Vora, associate vice president at Kotak Securities.

India's festive season, which starts in late August and goes on till November end, is usually marked by strong retail purchases, which FADA hopes will help ease inventory buildup.

However, weaker-than-expected sales during this period "could lead to an inventory correction post-November," Kotak's Vora said.

Sales of three-wheelers jumped 74% to more than 94,000 units - a record high for the month of July, while those of passenger vehicles grew marginally by 4% with heavy rainfall in north India slowing demand, FADA data showed.

Two-wheeler sales rose more than 8% in the month, as per the data.

Hero MotoCorp and Bajaj Auto reported a fall in July wholesale volumes of two-wheelers, with Hero flagging "a sharp decline in customer footfall at dealerships" due to incessant rains and floods in several states.

FADA noted that the below-average rain forecast for August could impact purchases in rural India, a key segment for bike makers.