Analysts believe auto stocks may be range-bound unless their earnings growth turn out to be better than expected.
The auto industry continues to lose sheen in September with the monthly sales data falling below expectations for most companies. The downturn is also getting reflected in the stocks of these companies, which are trading near their 52-week lows.
What's the road ahead for the sector and what should you, as an investor, do with your investments? Let's do a 3 point analysis.
The auto sector as a whole has been reeling under multiple blows. Fuel prices are at an all-time high, and interest rates are rising. A deficient monsoon, delayed festive season, and also the after effects of the Kerala floods have dampened sentiments.
Some of the top brokerage houses have changed their stand on the auto industry and believe there are multiple speed bumps which will soften the demand and volume growth in the 2nd half of FY19. However, the festive months of October and November will be better for the sector on the back of bulk sales.
Some of the macroeconomic headwinds such as a depreciating rupee, the rising prices of raw materials such as rubber and metals, however, pose risks to earnings growth.Should you buy auto stocks in this correction? Analysts believe auto stocks may be range-bound unless their earnings growth turn out to be better than expected. Top brokerage houses prefer to stay with fundamentally strong names where demand is strong despite domestic headwinds. LKP Securities, PL Research & HDFC Securities bet on Bajaj Auto as their top pick in two-wheelers while Ashok Leyland is the preferred bet in the Commercial Vehicle space