Nifty auto index at a record closing high as momentum continues

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26 Aug, 2025 12:21

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A drop in the price of crude oil and a correction in metal prices has prompted stock market bulls to take over the automobile sector.

The Nifty auto index closed above the 12,100 mark for the first time since its launch in 2011 and ended at a record closing high of 12,114.1 on July 7, rising 1.35 percent over the previous session.

Technically, the index has been making higher highs and higher lows since hitting its nadir in March, gaining more than 31 percent during the period, much more than any sectoral index.

MACD, or moving average convergence divergence, has indicated a positive trend on daily, weekly as well as monthly charts, while oscillators are also pointing to positive sentiment on all scales.

After a strong gap-up opening on July 7, the auto index formed a bullish candle on the daily chart. A bullish candle was still on the weekly as well as monthly charts.

Even the exponential moving average (EMA) indicated a positive trend. The index's five-day EMA moved above 13 DEMA as well as 26 DEMA, which can be considered a golden crossover, on June 23 and has sustained above these levels.

Tata Motors, MRF, Mahindra & Mahindra, Balkrishna Industries, Exide Industries, Tube Investments of India, Bharat Forge, Eicher Motors, and Amara Raja Batteries gained 1-3.5 percent.

The cooling off of metal prices was the biggest driver for the sector. Metal forms the major portion of auto companies' operating expenses. All metal prices corrected in double digits, while the Nifty metal index has lost more than 30 percent from its high.

Policy tightening announced by the Reserve Bank of India (RBI) seems to have been priced in by the sector, which is also hopeful that the central bank would be sticking to pre-COVID repo rate levels in upcoming policy meetings, experts said.

They also said a revival in auto sales in the last few months after the easing of a semiconductor shortage and consistent spending on infrastructure by the government has boosted investor sentiment. The monsoon's progress has raised hopes of better prospects for the rural market.

"As compared with June 2021, most automobile manufacturers reported growth in the wholesale volumes in June 2022. Any positive development with respect to improvement in rural sentiment and easing of supply chain constraints will support volume growth going ahead," said Arun Agarwal, Deputy Vice President at Kotak Securities.

A decline in oil prices is also playing a supportive role for the sector. Oil prices traded at around $100-101 a barrel in the international markets against $123 a barrel the previous month.

If there is a consistent fall in oil prices going forward, the government may reduce fuel prices, which can be another positive factor for the auto industry, experts said.

Disclaimer: The views and investment tips of 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.