Auto firms: Auto firms up, however buyers have to be cautious: Analysts

Mumbai: Shares of car makers rose on Monday, bucking the weak general market pattern, as expectations of a pick-up in demand amid the upcoming festive season cheered buyers. The BSE Auto Index gained 0.8% to hit an all-time closing excessive in Monday’s buying and selling, whereas the benchmark Sensex declined near 0.4%. Analysts mentioned buyers have to be cautious of committing cash to most auto shares for the longer interval following the current positive aspects, however the bullish momentum nonetheless makes them good buying and selling bets.

Mahindra & Mahindra surged by 2.52%. TVS Motor, Hero Moto Corp, and Tata Motors moved up by about 1% on Monday. The festive season, which begins within the second half of September, is predicted to drive demand throughout segments throughout the auto business, mentioned analysts. “Preliminary festive response has been encouraging with the PV (passenger automobile) area nicely geared for 12% quantity progress this festive season at round 1 million models,” mentioned Pankaj Pandey, head of analysis, ICICI Direct.

Previously six months, BSE Auto Index has superior 34% as in opposition to the 17% up transfer within the Sensex. Some analysts are extra constructive on business automobile (buses and vehicles) makers amongst car producers.

“Section-wise, we’re constructive on business autos as a result of demand for this section picks up within the second half of the 12 months,” mentioned Saji John, lead automotive analyst, Geojit Monetary Companies. “Sturdy progress in SUVs (sports activities utility autos) is predicted to help the passenger automobile demand as nicely.” “The valuations are streamlined with the historic common on Nifty, which makes it a great time to put money into auto,” mentioned John. M&M, Ashok Leyland, Maruti, and TVS Motors are his prime picks. Some analysts mentioned positive aspects in auto shares hereon might be capped as many of those shares have run up already.

“Because the profitability peak of the rally is already achieved, it isn’t one of the best time to put money into these securities however there may be nonetheless room,” Pandey mentioned. Tata Motors, Maruti, Jamna Auto and Gabriel India are his prime inventory picks within the auto and auto-ancillary sectors.

Pandey expects the tempo of quantity progress to sluggish after the robust rebound in the last few quarters. “Auto area has witnessed wholesome margin restoration over the previous few quarters amid strong quantity progress of 23% in FY23 and ample worth hikes within the system,” he mentioned. “On this excessive base, quantity progress is seen tapering for the sector which coupled with an increase in commodity costs leaves restricted scope of margin restoration within the close to time period.”

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