Auto shares in focus; BSE Auto index hits three-month high

Thus far in November, auto index appreciated 5.1% against 2% fall in the S&P BSE Sensex.

Shares of automobile companies are in focus with the Bombay Stock Exchange (BSE) S&P BSE Auto index hitting a three-month high ahead of Ashok Leyland, Maruti Suzuki India and Tata Motors inclusion in the MSCI India index. The changes will be implemented as of the close of November 30, 2015.

Tata Motors, Maruti Suzuki India, Ashok Leyland and Bajaj Auto were up 2% each, while Mahindra & Mahindra up 1% on the BSE in late morning deals.

At 10:47 AM, the S&P BSE Auto index, the largest gainer among sectoral indices, was up 1.3% or 247 points at 19,127 as compared to a marginal 0.18% decline in the S&P BSE Sensex.

The auto index hit an intra-day high of 19,113, its highest level since August 21, 2015. Thus far in November, it appreciated 5.1% against 2% fall in the benchmark index.

Inclusion or deletion from the MSCI indices impacts foreign investments into a stock, as passive or exchange traded funds have to adjust their portfolios accordingly. Meanwhile, automakers will release their sales numbers for the month of November starting Tuesday.

Nishant Vass and Jeetendra Khatri, analysts at ICICI Securities believe, structurally the passenger vechiles space remains the most favored bet on account of low penetration, lower fuel prices reducing interest rates and possible demand surge aided by the 7th Pay commission.

“We expect the space to grow at around 14% CAGR (FY16-18E). We remain negative on mass market 2-wheeler and expect low growth of around 5-6%. On M&HCV side we believe bulk of rapid growth is behind us and now sales would depend on economic recovery,” they said in a report dated November 21, 2015.