The automotive sector has exhibited impressive performance both in the current year and over the past twelve months, driven by significant volume expansion and improved operational efficiency.
During Q3FY24, automotive companies witnessed favorable year-on-year volume growth across various segments. This uptick in volume was further bolstered by enhanced realizations, attributed to the implementation of premiumization strategies and improved net pricing. Additionally, favorable margin performance was achieved through a favorable product mix and benefits derived from easing commodity prices.
The Nifty Auto index has surged by 75 percent in the last year and almost 16 percent in the year-to-date of 2024. In comparison, the benchmark Nifty has advanced by over 29 percent in the last year and 3.5 percent in the year-to-date of 2024.
The auto index witnessed a 5 percent rise in March, marking its fifth consecutive monthly gain since November 2023. During this period, it rallied by 34.5 percent. In 2024, it recorded increases of 3.3 percent in January and 6.2 percent in February.
In the past year, all constituents of the Nifty Auto index have shown positive returns, with four delivering multibagger returns to investors. Tata Motors witnessed the highest surge in FY24, rising by 139.5 percent, followed by Bajaj Auto, TVS Motor, and Hero Moto, which increased by 135 percent, 101 percent, and 100 percent, respectively.
Other companies such as Samvardhana Motherson, Sona BLW, M&M, MRF, Bosch, and Maruti Suzuki also saw significant gains of over 50 percent each.
Meanwhile, Bharat Forge, TI India, Eicher Motors, Ashok Leyland, and Balkrishna Industries advanced between 18 and 49 percent.
Looking ahead, experts have varied opinions on the performance of the automotive sector in FY25:
- Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy, expects the trend to continue in the auto space due to favorable market demand and anticipated rate cuts. He prefers passenger vehicles over other segments from a technical perspective.
- Akshay Karwa, Research Analyst at Anand Rathi Institutional Equities, believes that replicating last year’s performance across segments will be challenging due to various factors such as inflationary pressures and mature market conditions. He anticipates growth in the two-wheeler and passenger vehicle segments, while commercial vehicles and tractors may face challenges.
- Ashwin Patil, Senior Research Analyst at LKP Securities, suggests that the surge witnessed in the last year may not be replicated this year due to a high base. He expects the two-wheeler segment to perform well, driven by factors like premiumization, electrification, and new launches.
Disclaimer: It’s important to note that the views and recommendations mentioned above are those of individual analysts or broking companies, and investors are advised to consult certified experts before making any investment decisions.
