Led by Mahindra & Mahindra, auto stocks rose again on August 1, buoyed by strong monthly sales data. The largest Indian maker of utility vehicles gained after recording 100,000 orders for the all-new Scorpio-N within 30 minutes of the commencement of bookings.
The Nifty auto index rallied 410 points, or 3.3 percent, to end at record closing high of 12,953.65.
The index has been making higher highs and higher lows since mid-May despite volatility in benchmark indices, rising more than 35 percent since March lows.
Mahindra & Mahindra was the biggest gainer with a 6.2 percent rise, hitting a record high after receiving stellar demand for the Scorpio-N, bookings for which opened on Saturday.
Even its automobile sales increased by 30.6 percent year-on-year (YoY) to 56,148 units, though tractor sales fell 14 percent to 23,307 units in July.
Prabhudas Lilladher raised its domestic passenger vehicle (PV) volume estimates for M&M by around 3 percent and 2 percent, and earnings per share by 1 percent each for FY23 and FY24 respectively, and the June 2024 target price to Rs 1,400 (versus Rs 1,380 earlier), considering the extraordinary response to Scorpio-N and improving chip supplies.
"We are positively surprised with M&M's Scorpio-N clocking over 1 lakh bookings within 30 minutes of its commencement. Scorpio-N’s deliveries will begin from September 26, 2022 and M&M aims at delivering 20,000 units by December 2022 (i.e. average monthly run-rate of around 6.6k units) and this is despite its existing order book of 143,000 units," said the brokerage.
M&M is one of Prabhudas Lilladher's preferred picks in the auto space given (1) a healthy turnaround in its auto segment through back-to-back successful launches in the highly competitive SUV space (2) its proactive leveraging of the electric vehicle trend that can lead to value unlocking (3) its leadership position in the tractor industry and (4) its well-played out capital allocation strategy.
Tata Motors was the second biggest gainer, rising 6.6 percent after the company reported a 51 percent year-on-year increase in July sales at 81,790 units, though on a low base as the year-ago month sales were affected by the second Covid wave.
Commercial vehicle maker Ashok Leyland rose 3.5 percent as the company sold 13,625 units in the month gone by, up 58 percent compared to 8,650 units sold in same month last year.
Maruti Suzuki climbed 2.6 percent as the country's largest car maker sold 175,000 units in July, registering 8.3 percent growth YoY with domestic sales growing 10.2 percent YoY.
TVS Motor Company gained 2 percent, while Bajaj Auto rose 1.5 percent despite a 15 percent YoY decline in exports, as domestic sales grew by 9 percent YoY to 183,000 units, which resulted into a 4 percent decline in total sales for the month at 354,000.
Technically the Nifty Auto index has seen the formation of a large bullish candle on the daily charts.