Auto, tyre shares on a roll; Nifty Auto, M&M scale new highs; here's why

Auto, tyre stock update: Shares of auto and tyre makers rallied up to 5 per cent in intra-day deals on Tuesday, lifting the Nifty Auto index to a new all-time high on upbeat outlook.

Shares of automobiles and tyre companies were in demand and rallied up to 5 per cent on the BSE in Tuesday's intra-day trade owing to a healthy outlook. Mahindra & Mahindra (M&M), Apollo Tyres, MRF, Balkrishna Industries, TVS Motor, Hero MotoCorp, Ashok Leyland and Bajaj Auto were trading higher in the range of 2 per cent to 4 per cent.

The S&P BSE Auto index hit a new high at 51,389.34, gaining 2.3 per cent in intra-day trades. At 11:13 am; the auto index was the top sectoral gainer, up 2 per cent, as compared to 0.4 per cent rise in the S&P BSE Sensex. In the past six months, the auto index has zoomed 42 per cent, as against the 17 per cent rally in the benchmark index.

Among individual stocks, M&M hit a new high of Rs 2,157.85, surging 5 per cent in intra-day trade after the company said it launched the much awaited and teased compact SUV i.e. XUV 3XO on Monday.

XUV 3XO will be available in both petrol and diesel variants. The price of petrol variant ranges from Rs 7.5 lakh - Rs 15.5 lakh, while that of diesel variant ranges Rs 10 lakh - Rs 15 lakh. The petrol variant is offered in two engine options: 110hp and 130hp. The base petrol variant is cheaper by ~Rs 50,000 than the outgoing model.

With a healthy pending order book and augmented production capacity (50,000 units per month now from 40,000 units earlier) ICICI Securities expects M&M to outperform the domestic passenger vehicle (PV) space over FY24-25E and is its top bet in the OEM domain. The brokerage firm has a positive view on the stock.

Motilal Oswal Financial Services believes the new XUV 3X0 would further bolster M&M's position in the UV segment and strengthen its position in the Rs 1-1.5m price segment. With its attractive pricing and many first-in-class features, M&M is on track to replicate the success of XUV 700 in the UVC segment.

Meanwhile, the domestic PV Industry reported the highest sales volume of 4.2 million units, up by 8.4 per cent year-on-year (YoY) in FY24, driven by new SUV launches and improvement in the supply of semiconductors. SUVs contribute >50 per cent of the overall PV Industry.

Analysts at Sharekhan expect the domestic tyre industry to benefit from a recovery in automobile sales in rural and semi-urban markets, driven by pent-up demand, preference for personal mobility and faster-than-expected recovery in infrastructure, mining, and other economic activities.

The tyre industry is well-positioned to gain momentum in the future, backed by higher OEM offtake. The ripple effect of OEM demand is likely to result in steady growth for the replacement demand. Further sharp correction in the raw material basket augurs well for the surge in profitability, the brokerage firm said.