Signs of robust demand for two and four-wheelers have spurred shares of automotive companies, with the Nifty Auto index rising by nearly 1.5 percent on September 23, led by Maruti, Eicher, Tata Motors, M&M and Hero Moto along with consumer loan NBFC Bajaj Finance, thus cushioning the broader market weakness.
Among F&O names, Ashok Leyland, Bajaj Auto, TVS Motor and Bharat Forge joined the ranks of top gainers. The momentum has ensured that all components of the Auto index were trading higher, barring one. Over the last 30 days, shares of ancillary players such as Motherson Sumi and Bharat Forge are higher between 10-15 percent, in ancitipation of the ruboff to their businesses.
Early trends and dealer channel checks have showed that the first day of the festive sales during the ongoing Navratri season have seen a healthy demand, with Maruti, Tata Motors and Hyundai Motor India posting strong bookings following a subdued September due the Shradhh period during which fresh purchases are typically deferred.
Brokerages Bullish
Adding the momentum for Maruti was a bullish note by Goldman Sachs that has upgraded the stock Buy from Neutral with a target of Rs 18,900 per share, sending the shares to a 52-week high.
In a separate note, Nuvama said the demand upcycle in the passenger car segment could continue up to FY29, helped by GST 2.0 with healthy demand expected across two-wheelers, tractors, and PVs.
"PV is at a mid to advanced stage of the upcycle. Average/maximum duration of upcycle as per historical data is six/eight years; hence, upcycle can continue up to FY27/FY29," said the Nuvama note. The brokerage attributed the momentum in automotive companies to GST cuts, new launches, the anticipation of benefit from the upcoming pay commission recommendation for government employees and hopes of another RBI rate cuts this year. Nuvama cited historical data that suggested upcycles lasting between 6-8 years to suggest that the current cycle in 2Ws could continue till FY30.
Emkay Global quoted an automotive dealer from Western India who said that the tide may be turning for passenger cars after nearly two years of subdued growth. It quoted a 15-20% on year growth in bookings across segments so far in September for the region. The volume growth for October-December period is expected to over 20 percent, the dealer added.
The automotive dealer told Emkay that the demand for electric 2Ws is expected to sustain even after the price gap with ICE bikes has narrowed following the GST cut, and said customers are willing to pay a premium for differentiated offerings. Trucks are seeing more value growth than volume growth as fleet operators are choosing to shift to higher tonnage vehicles to improve utilization, the dealer told Emkay Global.
Read More: Maruti Suzuki's sharp price cuts may hit margin by 100 bps near term: Nomura
Carmakers See Strong Demand
Tata Motors has recorded 10,000 deliveries and over 25,000 enquiries on the first day of Navratri, in a sign of strong demand on the first day of the festive season.
The management of Maruti said the company has had close to 30,000 bookings and 80,000 enquiries were registered on the first day of Navratri. Hyundai Motor India said the company recorded 11,000 dealer billings on September 22, marking its best day in five years. The management said it sees the demand sustaining ahead.
Maruti has further extended the passthrough of GST benefits by cutting prices of entry-level hatchbacks in a strategic manner in an attempt to revive the small car segment. Maruti's current discount schemes are expected to continue till the end of September, over and above the price cuts.
Tarun Garg, Whole-Time Director and COO of Hyundai Motor India said, "The auspicious start of Navratri, amplified by the momentum from GST 2.0 reforms, has infused strong positivity into the market. On Day 1 alone, Hyundai Motor India Limited recorded around 11,000 Dealer billings, which is our highest single-day performance in the last five years". The robust sentiment and customer confidence has prompted Hyundai to anticipate that the demand is expected to sustain.
Tata Motors had in August said that it is 'hopeful' of the festive demand extending till December 2025, as was the trend during the last financial year.
All segments of cars ranging from hatchbacks to luxury SUVs have become cheaper, with customers standing to save between Rs 40,000 and Rs 30 lakh on ex-showroom prices.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
