Shares in the automotive sector and related companies were under pressure. The National Stock Exchange (NSE) Auto index fell by more than 2 percent due to profit-taking after July sales figures.
Tata Motors, Eicher Motors and Maruti Suzuki India fell 3-5 percent. Mahindra & Mahindra (M&M), Hero MotoCorp, TVS Motor Company and Bajaj Auto fell 1-2 percent. While Cummins India and Apollo Tyres fell 9 and 3 percent respectively in intraday trade on Friday.
At 12:02 pm; the Nifty Auto index, the biggest loser among sectoral indices, was down 2.3 percent compared to a 0.9 percent decline in the Nifty 50. Despite today’s fall, the Auto index has outperformed the market so far in calendar year 2024 by surging 38 percent compared to a 14 percent rally in the benchmark index. In the past one year, the Nifty Auto index has surged 65 percent compared to a 27 percent rise in the Nifty 50.
Overall, wholesale volume performance was subdued in July 2024, with some segments such as passenger cars, commercial vehicles and certain two-wheeler players reporting weak sales volume.
Domestic passenger vehicle industry volumes are expected to have declined year-on-year (YoY) due to inventory correction amid weak demand trends. Domestic two-wheeler wholesale segment volumes are expected to have grown by high single digits YoY. However, the performance was mixed with a few players reporting YoY volume decline, Kotak Securities said on July wholesale volume performance.
With the Nifty Auto index valuation above its 10-year average despite the volume trend and rising commodity prices, we maintain our neutral rating on the auto sector, said brokerage firm InCred Equities.
Meanwhile, ICICI Securities expects the 2-W space to register double-digit volume growth in FY25E amid forecast of normal to positive monsoon rainfall in 2024, higher government spending on the rural economy and several government schemes at the state and central levels to benefit the low-income groups.
The recent increase in rainfall across the country bodes well for the domestic tractor market, supported by the broader forecast of a normal to positive monsoon season in 2024. However, both tractor players have warned of the rise in rubber prices affecting near-term profitability, the brokerage said.
On the PV front, most players have forecast low single-digit volume growth for FY25E (on a high base), with M&M expected to outpace its peers on the back of a healthy order book, strong response to the recently launched XUV 3XO and planned ramp-up in production capacity (exit capacity for FY24 at ~50,000 units), it added.
Within the CV space, the M&HCV bus segment continued to outperform trucks. With growth-oriented policy continuity at its core, the brokerage said it expects industry volumes to perform well in H2FY25. The industry outlook is for neutral to +5 percent volume growth for FY25E.
First print: Aug 02, 2024 | 12:37 PM IST