Auto shares in demand; Escorts, Tata Motors, Eicher, M&M rally up to 5%

In the past six months, the auto index on both the BSE and NSE has underperformed the market by falling 8 per cent, compared to the 0.34 per cent decline in the benchmark indices Sensex and Nifty

Shares of automobile companies are in demand, with the Nifty Auto and BSE Auto index rallying over 2 per cent on expectation of the growth momentum in the auto sector to continue, driven by an improvement in rural sentiments in the domestic market. The government’s expenditure on the infra segment, coupled with increased preference for personal transport mediums, is expected to improve volumes, according to analysts.

 

At 10:41 AM, the Nifty Auto (2.3 per cent) and BSE Auto (2.08 per cent) were the top gainers among sectoral indices, climbing over 2 per cent each, as compared to the 0.7 per cent rise in the Nifty 50 and BSE Sensex. In the past six months, the auto sector indices on both the BSE and NSE have underperformed the market by falling 8 per cent each, as against the 0.34 per cent decline in the benchmark indices BSE Sensex and NSE Nifty50.

 

 

Stocks of Escorts Kubota, Bajaj Auto, Tata Motors, Eicher Motors and Mahindra & Mahindra (M&M), have rallied between 3 per cent and 5 per cent so far in intra-day trade today. Other notable names, including Samvardhana Motherson International, Maruti Suzuki India, Bharat Forge, TVS Motor Company, Ashok Leyland, Hero MotoCorp and Exide Industries from the index, are up in the range of 1 per cent and 2 per cent.

 

Among the individual stocks, Escorts Kubota has surged 5 per cent to Rs 3,302 on the BSE. The stock had corrected 29 per cent from its 52-week high level of Rs 4,422 hit on September 27, 2024. The underperformance of the stock was mainly due to weak tractor volumes.

 

However, for the full financial year 2024-25 (FY25), the management of Escorts Kubota expects the domestic tractor industry to continue its growth trajectory with mid-single-digit growth. The industry experienced record breaking growth in October demand due to a concentrated festival period, and also driven by above average rainfall and higher water level reservoir, anticipated higher crop yield, increased crop production, higher MSPs and improved terms of trade. Overall, the outlook for the later part of the fiscal is optimistic.

 

Shares of Tata Motors climbed 3 per cent to Rs 766.75 in intra-day trade on reports of the company’s Punch vehicle being projected to become India's top-selling car model in 2024, climbing six places in the rankings.

 

With approximately 186,958 units sold from January to November 2024, the Punch is set to overtake established leaders like Maruti Suzuki's Swift and Hyundai's Creta, as well as Tata's own Nexon and other popular models such as Maruti's Wagon R, Baleno, and Brezza. Its appeal among first-time buyers and small families bolstered by strong safety ratings and a range of powertrain options—including petrol, CNG, and electric—positioning it favourably in the competitive compact SUV market.

 

According to ICICI Securities, this is a remarkable feat for Tata Motors which is the 3rd largest passenger vehicle (PV) player domestically with approximately 13-14 per cent market share. CY25E is expected to be a good year for Tata Motors with new launches lined up in the electric vehicle (EV) space. 

 

With Tata Motors' share price correcting more than 30 per cent from its peak, it offers a good entry point from a long-term investment horizon, given the turnaround in place at JLR, coupled with the substantial reduction in automotive debt on the balance sheet, apart from a focus on healthy profitability for the company's Indian operations. An added positive is the company's recent order wins in the domestic bus space which shall result in likely flattish commercial vehicle (CV) volumes for FY25E, the brokerage firm said in a research note.

 

Meanwhile, Mirae Asset Sharekhan said Tata Motors' production has been recovering with improvement in the semiconductor chip supply issue. The brokerage firm believes global vehicle production would see less headwinds in FY2024 compared to FY2023 on the back of an improved supply chain situation. While pent-up demand has been playing out in the domestic PV market, the same would continue to play out in the global luxury market for some time. The domestic PV and CV segments continue to witness an uptick in the near term as the CV cycle is assumed to be in a cyclical uptick phase and the PV segment is observing a structural uptick, Mirae Asset Sharekhan further noted.