Auto index set to post sharpest single day gain in 31 months

Nifty Auto (up 4.02%) and the S&P BSE Auto (up 4.2%) indices were up more than 4%, as compared to 2% rise in the benchmark indices at 02:38 PM.

Shares of automobile companies were riding high on the bourses on Friday as Nifty Auto and the S&P BSE Auto indices, set to post their sharpest single-day rally in 31 months, amid fall in oil prices and rupee recovery from record lows.

At 02:38 PM; Nifty Auto (up 4.02%) and the S&P BSE Auto (up 4.2%) indices were up more than 4%, as compared to 2% rise in the benchmark indices. Earlier, on March 1, 2016, auto indices were up 4.3% in a single day.

Since September 2018, the S&P BSE Auto index tanked 20% against 12% fall index benchmark index till Thursday. The month of September has been muted for passenger vehicles due to factors such as low consumer buying sentiment, high fuel prices and the effects of monsoon in many parts of the country.

Eicher Motors, Maruti Suzuki India, Mahindra & Mahindra and Apollo Tyres from the auto index were up more than 5% each. Escorts, Bajaj Auto, TVS Motor Company, Motherson Sumi Systems, Ashok Leyland and Bharat Forge up in the range of 3% to 5% on the BSE today.

With the peak festival season coming up in the months of October and November, the Company is confident of setting yet another global benchmark in retail sales during the period this year, Hero MotoCorp had said while announcing September sales numbers.

“For Q2FY19, volume growth for auto companies varied across segments as 4Ws and Tractors came in flat YoY while 2Ws and CVs registered double-digit YoY volume growth despite a mismatch in the festive season, resulting in moderate revenue growth of around 9% YoY,” analysts at Prabhudas Lilladher said in an earnings preview.

With commodity prices continuing to inch northwards, along with lower operating leverage and insufficient pricing action taken by the companies, we expect an EBITDA decline of around 15% YoY, resulting in net profit decline of around 28% YoY (up around 16% QoQ), it added.

“Despite the recent increase in ownership costs of automobiles due to price hikes and fuel price escalation, we expect healthy volume growth in FY19E, led by an increase in the government's infrastructure spending and persistent focus on the rural economy; strong rural demand; and new launches. CVs and PVs are likely to witness double-digit volume growth over FY18-20E,” Emkay Global Financial Services said in results preview.