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Auto stocks plunge despite strong August sales and demand outlook
Auto company shares fell sharply on Wednesday even though many companies sold more vehicles in August.
The broader Indian stock market was also falling, which added pressure to auto stocks.
Two-wheeler companies such as Hero MotoCorp and Eicher Motors fell the most.
Passenger-vehicle sales increased strongly compared with August last year.
Companies were sending more vehicles to dealers before the festive season.
Analysts said shoppers were still buying vehicles and inventories remained lean.
However, some companies sold fewer vehicles than in the previous month.
Analysts still expect the auto sector to attract investor interest if demand stays strong and costs remain under control.
The Nifty Auto index fell as much as 3.3% on Wednesday, September 2, versus a 1.1% decline in the Nifty 50.
Hero MotoCorp and Eicher Motors were the worst Nifty Auto performers, dropping about 6% and 5%, respectively.
Passenger-vehicle sales rose 36% year over year in August to an estimated 4.48 lakh units.
Several automakers reported strong August growth, including Tata Motors Passenger Vehicles, M&M, TVS Motor, Bajaj Auto and Royal Enfield.
Brokerages cited healthy demand but noted month-on-month moderation, while the broader Indian market selloff pressured auto stocks.
- Who
- Indian automakers, two-wheeler manufacturers, commercial-vehicle companies and auto-ancillary firms, including Hero MotoCorp, Eicher Motors, Bajaj Auto, TVS Motor, Maruti Suzuki, Tata Motors, M&M and Hyundai Motor India.
- What
- Auto stocks fell by up to 5%, led by two-wheeler companies, despite strong year-over-year August sales and positive broker commentary.
- Where
- The Indian stock market and India’s automobile market.
- When
- Wednesday, September 2; the sales data covered August.
- Why
- The decline reflected a broader Indian market selloff and mixed sales trends, including month-on-month moderation, despite strong year-over-year demand and festive-season inventory building.
Reasons for the selloff
Reasons for optimism
Share-price performance
Reasons for the selloff
Auto stocks came under heavy selling pressure during a broader Indian market decline, with every Nifty Auto constituent trading in the red.
Reasons for optimism
The sector’s weak share performance did not reflect the strong year-over-year sales growth reported by several automakers.
Recent sales momentum
Reasons for the selloff
Some companies, including Maruti Suzuki, Hyundai Motor India, M&M and TVS Motor, recorded lower volumes month over month, according to Emkay Global.
Reasons for optimism
Retail demand remained encouraging, and passenger vehicles, commercial vehicles and two-wheelers posted healthy double-digit year-over-year wholesale growth, according to Motilal Oswal.
Company performance differences
Reasons for the selloff
Motilal Oswal said Royal Enfield underperformed peers with 11% volume growth, while Hero MotoCorp’s volumes grew 3% year over year.
Reasons for optimism
Tata Motors Passenger Vehicles and M&M outperformed some peers, Bajaj Auto exceeded brokerage expectations, and easing supply constraints and lean inventories supported sales.
Key facts
- Nifty Auto movement
- The index fell as much as 3.3%, while the Nifty 50 declined 1.1%.
- Worst performers
- Hero MotoCorp fell 6% and Eicher Motors fell 5%; Bajaj Auto declined 3% and TVS Motor 2.65%.
- August passenger-vehicle sales
- An estimated 4.48 lakh cars, SUVs and vans were sold, up 36% from 3.30 lakh units a year earlier.
- Maruti Suzuki sales
- Maruti Suzuki sold nearly 1.77 lakh vehicles in August and crossed 1 million total sales in the first five months of FY27.
- Two-wheeler sales
- TVS Motor sales rose 18% to 4.34 lakh units, while Bajaj Auto’s domestic motorcycle sales increased 10% to 2.02 lakh units.
- Brokerage view
- Emkay Global and Motilal Oswal described underlying demand as strong but noted some month-on-month moderation.
- Preferred stocks
- Motilal Oswal named Maruti Suzuki, TVS Motor and M&M as preferred OEM picks, and Motherson Sumi Wiring India, Samvardhana Motherson International and Endurance among ancillaries.
Quotes
Motilal Oswal Financial Services
Domestic brokerage that assessed August auto sales and sector prospects
“Overall, given the sustained demand momentum and cooling input cost pressure, we expect renewed investor interest for the sector in the coming quarters.”
livemint.com
Sources
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