Auto shares trade weak post November sales; Eicher, M&M down up to 3%

Shares of automobiles companies traded on a weak note amid profit booking on Friday after they reported a mixed set of sales numbers for the month of November.

At 12:19 PM, Eicher Motors, Mahindra & Mahindra (M&M) and Ashok Leyland were down in the range of 2 per cent to 3 per cent, while Hero MotoCorp, Bajaj Auto, Escorts and Maruti Suzuki India (MSIL) slipped between 1 per cent and 1.9 per cent on the National Stock Exchange (NSE).

Nifty Auto index, the top loser among sectoral indices, was down 1.1 per cent, as compared to 0.86 per cent decline in the Nifty 50. The auto index was trading lower for the second straight day. However, since April, in the past eight months, the Auto index had rallied 25 per cent, as against 10 per cent rise in the benchmark index.

Dispatches for passenger vehicles (PVs) and commercial vehicles (CVs) for November were in line, while two-wheelers (2Ws) were below estimates. On the other hand, tractors were above estimates. Miss in 2Ws was largely attributed to weak exports and inventory correction post festive season. Easing of chip shortages, coupled with healthy demand sentiments, is driving PV volumes. Despite inventory correction, tractor wholesales grew 11 per cent YoY, Motilal Oswal Financial Services said.

According to ICICI Securities recovery path paused for the domestic three-wheelers (3Ws) space with all players reporting MoM volume decline, with M&M being the only exception reporting marginal growth largely driven by its electric offerings in this space. In the Tractor space, growth came in healthy with both the players in the listed space reporting healthy volume prints in a seasonally weak month, the brokerage firm said.

For PVs numbers for the month came in lower than brokerage expectations and was a negative surprise. Going forward it expect volumes in the PV space to improve amid healthy order-book across OEMs.

M&HCV segment witnessed mixed performance while LCV segment witnessed near double digit de-growth leading to overall de-growth in CV space. Going forward, with cyclical upswing & greater infra spends; the brokerage firm expects CV volumes to strengthen with expectations set for higher double digit volume growth in FY23E. In the 2-W space, volume prints came in much lower than our expectations amidst healthy retails for the month of November 2022, the brokerage firm said in a note.