India's lagging automobile stocks face risk of festival season fizzle

Investors counting on India’s upcoming festival season to help revive the fortunes of the nation’s automobile stocks could be in for a disappointment.
 

Below-normal monsoon rains that have impacted rural demand and the risk of an impending third coronavirus wave are posing a challenge for Indian vehicle makers. That’s in addition to the problems of rising input costs and a semiconductor shortage the global auto industry is faced with.

A gauge of Indian automobile shares has lost 2.5% so far this quarter, the only loser among the BSE Ltd.’s 19 sector groups. The benchmark S&P BSE Sensex has rallied 12% during this period, while the MSCI World Automobiles Index is up 3.4%.

Passenger vehicle sales in India will be weak in the quarter ended September, which normally signals demand for the festival season that starts in October, according to Amit Hiranandani, an analyst at SMIFS Ltd. 

To make matters worse, production challenges have already forced customers to wait for as long as four months for the delivery of vehicles, which means there’s uncertainty whether orders will be met during the festive season, according to Hiranandani.