Auto shares in focus ahead of November sales; Tata Motors, TVS Motor up 5%

Cummins India, Ashok Leyland, Motherson Sumi, Bajaj Auto, Balkrishna Industries, Exide Industries and Amara Raja Batteries from the auto index were up between 3 per cent and 5 per cent on the BSE

Shares of automobiles companies were in focus at the bourses on Friday ahead of the November month sales numbers, which release next week. The stock market will remain closed on account of Gurunanak Jayanti on Monday, November 30.

At 11:00 am, the S&P BSE Auto index, the top gainer among sectoral indices, was up nearly 2 per cent, as compared to 0.19 per cent decline in the S&P BSE Sensex. The auto index hit an intra-day high of 20,218, is trading close to its 52-week high level of 20,282 hit on Wednesday, November 25.

Among individual stocks, Tata Motors and TVS Motor Company were up 5 per cent at Rs 183 and Rs 501, respectively on the BSE in intra-day trade. Cummins India, Ashok Leyland, Motherson Sumi Systems, Bajaj Auto, Balkrishna Industries, Exide Industries and Amara Raja Batteries from the index were up between 3 per cent and 5 per cent on the BSE.

According to brokerages, the festive season was reasonable with no major negative surprises. The demand after the festive season has been decent so far. The wholesales in November 2020 are expected to grow year-on-year (YoY) for all segments (ex-M&HCV) due to sustaining demand, inventory refilling and normalizing supply-chain bottlenecks at the OEM level, Motilal Oswal Securities said in sector update.

While the festive season has augured well, with no major negative surprise, current demand and low inventory sentiment suggests higher wholesales in Dec’20. The valuations are reflecting a recovery during October-March period (2HFY21), leaving a limited margin for safety for any negative surprises, it said. The brokerage firm said it prefer companies with higher visibility in terms of demand recovery, strong competitive positioning, margin drivers, and balance sheet strength.

Analysts at Reliance Securities believe that the monthly industry volume was supported by positive sentiment, decent traction during festival season and channel refilling. Rural markets have already witnessed healthy volume up-tick in past few months, while the urban markets also started witnessing improvement post unlocking. Emkay Global Financial Services expect volumes to improve in the coming quarters on better rural sentiment, low interest rates, improving finance availability, and a gradual pick-up in business and economic activity.