Synopsis:
Bajaj Auto and Eicher Motors are among the eight Nifty Auto stocks that have reached new highs this year, reflecting positive sentiment and strong performance within the sector. The surge in these stocks underscores investor confidence in the automotive industry despite challenges posed by the COVID-19 pandemic and supply chain disruptions. Other Nifty Auto stocks that have attained new highs include Hero MotoCorp, Maruti Suzuki India, Mahindra & Mahindra, Tata Motors, TVS Motor Company, and Bosch. The uptrend in these stocks is attributed to factors such as robust sales figures, strategic initiatives, and favorable market conditions. Bajaj Auto and Eicher Motors, in particular, have witnessed significant appreciation in their share prices, buoyed by strong demand for their products and a recovery in the domestic and international markets. The performance of these stocks reflects the resilience and growth potential of the Indian automotive sector, which continues to attract investor interest despite prevailing uncertainties. ICCBizNews will provide detailed coverage of these developments, offering insights into the factors driving the upward trajectory of Nifty Auto stocks and their implications for investors and stakeholders in the automotive industry.
Auto stocks have surged at full throttle throughout this year, propelled by a combination of factors, including an upswing in demand, favorable margin trajectories, and robust product cycles for various companies. In Q2 FY24, the majority of automobile companies witnessed robust double-digit volume growth across all categories, except tractors.
The resurgence in domestic volumes for two-wheelers, coupled with a recovery in rural demand after a two-year lull, has significantly impacted the market. Moreover, strategic partnerships, such as Hero Moto Corp joining with Harley Davidson and Bajaj Auto teaming up with Triumph, have displayed the growing demand in the premium motorcycle segment in the Indian two-wheeler market.
The easing availability of semiconductor chips and a decline in steel and aluminium prices have contributed to the recovery of gross margins for automakers. The softening prices of essential metals are particularly significant, given that an average two-wheeler, passenger car, and heavy commercial vehicle weighs about 110, 800, and 3,000 kg of steel, respectively.
Simultaneously, the demand for SUVs in India has witnessed a meteoric rise, with SUV sales accounting for 52% of total car sales in FY23, up from 28% in FY19. Domestic brokerage firm ICICI Direct Research anticipates this trend to continue as consumer demand for SUVs grows.
Looking forward, analysts express optimism about the future of the automobile sector, foreseeing sustained strong demand driven by increasing per capita income. The ongoing enhancements in road infrastructure and national connectivity are also expected to contribute positively to the growth of the automobile industry.
Furthermore, the recently implemented vehicle scrappage policy of 2021 is anticipated to provide additional stimulus to the demand for automobiles.
Looking at the performance of the auto stocks, eight out of 15 Nifty Auto constituents this year have recorded new all-time highs. Notably, TVS Motor Company shares have experienced a remarkable upward trajectory this year, surging from ?1,085.40 apiece to ?1,799.95, reflecting a substantial gain of 69%. On November 24, the stock even reached a new peak of ?1,818 apiece.
The surge in the company's stock began in April and continued through all months until October, marking a consistent positive trend. During this period, the shares soared from ?1,077 apiece to reach the current value of ?1799.5.
Similarly, Bajaj Auto, the flagship company of Bajaj Group, saw its shares perform exceptionally well on the exchanges this year, gaining 64% so far. This marks the stock's best yearly performance since 2010.
The company's shares have been on a continuous uptrend since January 2023, with no significant pullbacks. Over the last ten months, the stock finished eight months in positive territory. In today's trade, the stock recorded a new peak of ?5,972, coming close to the ?6,000 mark.
Shares of Eicher Motors hit a new historic high of ?3,920 apiece on November 24. Currently, the premium bike market is largely dominated by Eicher Motors' Royal Enfield, the oldest motorcycle brand in continuous production that holds more than 90% of the market share in motorcycles with engine capacities greater than 250cc.
Tube Investments, another auto stock belonging to the Murugappa Group, marked a new all-time high of ?3,830 apiece on November 22. The stock has risen from ?2,775 apiece to ?3,460 in the current year so far, generating a return of nearly 25%.
Balkrishna Industries, a leading manufacturer of over-the-highway tyres, also registered a new record high of ?2,862.95 apiece on November 16. In a similar vein, MRF, known for holding the title of being the most expensive stock in the Indian stock market, has witnessed a further increase in its value, making it even pricier.
Starting the year at ?88,600 apiece, MRF's shares have surged 26% to the current level of ?1,11,448. On October 17, the stock recorded an all-time high of ?1,13,439 apiece.
Other stocks, including Mahindra & Mahindra and Maruti Suzuki India, also set new all-time highs, reaching ?1,670 and ?10,845, respectively.
Disclaimer: The views and recommendations given in this article are those of individual analysts. We advise investors to check with certified experts before making any investment decisions.
