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nifty The auto index trades flat with a positive bias on a year-on-year (YTD) basis as against 13 per cent decline in the benchmark Nifty 50.
Vikas Khemani, Founder, Carnelian Capital Advisors said that automobile is a good business which is growing on recovery especially from volume perspective. “We know that semiconductor chip shortages have slowed demand and growth, but 2023 could be a very good year from that point of view,” Khemani said.
The auto index has underperformed the market for the past four years. Even now, semiconductor and supply chains continue to grow, but demand for automobiles remains strong, with waiting periods ranging from three months to two years.
Industry experts suggest that healthy bookings and single-digit cancellations suggest that demand may continue even if normal supply resumes in the coming months. This optimism is being reflected in the stock price movement of the pioneer. auto stock,
M&M,
And are up 2-11 per cent in a month while Nifty 50 is down 6 per cent. And although the business has managed to outperform marginally in the red.
“After several years of poor performance, we are seeing auto stocks come back quite strongly. They are currently in a kind of blue sky scenario. We have seen a clear turnaround in their fortunes. And with this the government’s latest move to reduce steel prices, much of the pressure on their operating profit margins will ease. The auto stock is likely to move into a leadership position over the next several months and quarters,” said Deepan, Director, Elixir Equities. Mehta told ET Now.
Where to bet: PV, CV, 2W?
While the overall valuation of the auto sector looks attractive, analysts are inclined towards consumer-facing stocks, especially in the four-wheeler segment. The consensus on two-wheelers remains weak.
Hemang Jani
The demand for passenger vehicles (PV) is expected to improve on the back of easing of supply chain issues. However, he sees a slow recovery in 2-wheelers (2Ws).
According to the Automobile Dealers Association of Automobile Dealers Association (FADA), data revealed that retail sales of passenger vehicles increased last month, but sales of two-wheelers and commercial vehicles remained lower as compared to the pre-Covid month of May 2019.
“whereas PV And tractors continued their positive performance… Two wheelers, three wheelers and CV sales are still showing no signs of healthy run-rate,” FADA President Vinkesh Gulati said in a statement.
Intense competition and disruptions from EVs don’t make me optimistic about Bajaj Auto, Hero MotoCorp and so on.
Deepan Mehta said. Companies like Tata Motors, Mahindra & Mahindra and more remain their top picks.
opposite of this,
The research believes that there is extreme pessimism in terms of 2W and some overconfidence on PV and CV, which is reflected in the evaluation.
“Hence, we prefer 2W in Auto Pack and our coverage has ‘Buy’ on three stocks – Bajaj Auto,
and Hero MotoCorp,” it said.
Headwind to Auto Story
While the demand outlook is playing in favor of auto stocks, liquidity crunch and slowing economic activity in the quarter could play a mitigating role.
“If auto loan rates go up by 1.5-2 per cent, margins will hit demand to some extent as most four wheelers are financed and that is the only challenge some of these companies will face,” Independent market expert Sandeep Sabharwal observed.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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