Investors find value in auto stocks; up 4%

Auto stocks rallied on Tuesday morning as the markets opened in the green for the fourth straight session. On the BSE, the auto sector stocks were up about 3.9%, while the broader Sensex was up about 2.6%.

 

Sector analysts attributed the buying interest among investors to the cheap valuations in the sector. The auto sector is expected to see a turn-around in the nest one-year period, led by the improvement expected in the two-wheeler segment and a fall in interest rates.

 

“We believe that with the interest rate cycle reversing (read inching up) and robust rural economy, two?wheeler stocks are likely to outperform over the next one year,” said a report on the sector by brokerage firm, Prabhudas Lilladher.

 

The report authored by analyst Surjit Arora said that good monsoon had resulted in rising rural income.

 

“Low penetration level, lack of adequate mode public transport and rising per capita income in rural India would lead to long-term healthy volume of two-wheelers. With rural economy accounting for 40-45% of the sales for two-wheelers, we expect good times ahead for two-wheeler manufacturers,” the report noted.  

 

Further, Indian automobile companies are likely to gain higher export market share from the Chinese players on account of rising labout cost in China and higher rupee depreciation compared to the Chinese yuan, against the dollar.

 

On Tuesday, the BSE auto sector index gain was led by Tata Motors which touched its 52-week high at Rs 340.30 per share, up 7.05%.This was followed by a 3.5% gain in Ashok Leyland and a 3.3% gain in Maruti Suzuki.

 

Among the two-wheeler manufactures, Hero MotoCorp was up 2.8% and Bajaj Auto was up 2.4%.