Shares of automobile companies including auto ancillaries and tyre firms continued their northward movement with the S&P BSE Auto index rising over 2 per cent and hitting a fresh record high of 30,329.42 points in Tuesday’s intra-day trade.
With today’s gain, the auto index has surged 39 per cent from its closing low of 21,802 hit on March 8, as upward momentum continues in commercial vehicles (CVs), passenger vehicles (PVs), and two-wheeler (2Ws) sales. In comparison, the S&P BSE Sensex was up 12 per cent during the same period.
At 02:45 pm; the index was the largest gainer among sectoral indices, up 2.3 per cent as against a 0.52 per cent rise in the S&P BSE Sensex.
Escorts Kubota, Apollo Tyres, Bosch, Maruti Suzuki India, Eicher Motors and MRF were up in the range of 3 to 9 per cent. Mahindra & Mahindra (M&M) and TVS Motor Company hit their respective record highs on rising 2 per cent and 3 per cent, respectively.
Thus far in the financial year 2022-23 (FY23), the BSE Auto index has outperformed the market by surging 26 per cent. In comparison, the benchmark index was up 2 per cent during the period.
The strong outperformance of the auto sector is mainly due to a pick up in the pace of monsoons, cut in excise duty on fuels (Rs 8/litre on petrol, Rs 6/litre on diesel) in May 2022 (thereby lowering running costs of vehicles and an impetus for new vehicle sales), decline in global crude prices, and expectations of further softness in fuel prices.
Meanwhile, in July 2022, CVs maintained robust growth momentum, driven by strong demand in both passenger and cargo segments. PV volumes also witnessed double-digit growth due to large order book and increased production. In addition, 2W volumes were positive due to a ramp-up in production and inventory build-up with dealers in the run-up to the festive season.
Analysts at Emkay Global Financial Services expect FY23 to be positive with a volume growth of 26 per cent for PVs, 20 per cent for CVs, 14 per cent for 2Ws, and 5 per cent for tractors.
“In the 2-W auto OEM space, we ascribe BUY rating to Eicher Motors amid launch of affordable offering in the premium motorcycle segment and assign HOLD rating to other incumbent 2-W auto OEMs. We await firm volume growth (monthly numbers) as well as more meaningful action from them on EV front before turning decisively positive,” ICICI Securities said.
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