Auto stocks in focus; Nifty Auto index up 5%, Tata Motors surges 15%

Shares of automobile companies rallied on Thursday, led by Tata Motors which surged as much as 15 per cent on the NSE. The Nifty Auto index gained 5.1 per cent and was the top sectoral gainer. In comparison, the Nifty50 index was up 2.9 per cent at 10:15 AM.

Among individual stocks, Tata Motors surged 14.77 per cent to Rs 89.70 in the biggest one-day gain for the stock in six months after reports said that Jaguar Land Rover had restored three-fourth of its budgeted production in China. According to a report in Mint, with lockdown measures easing in China all of its retailers are now open and sales are recovering.

Among other automobile stocks, Ashok Leyland and Hero MotoCorp surged over 10 per cent each to Rs 53.20 and Rs 2,167.25, respectively. Maruti Suzuki India, Mahindra & Mahindra and Bajaj Auto gained in the range of 5-7 per cent while Eicher Motor and TVS Motor were up over 4 per cent each.

Auto ancillary and tyre stocks also advanced in trade today. Bharat Forge zoomed 15 per cent while Motherson Sumi surged 10 per cent. Apollo Tyres was up as much as 8 per cent. Exide Industries, MRF, and Amara Raja Battery gained in the range of 4-5 per cent while Bosch was up 3.6 per cent.

Meanwhile, in a report dated April 30,2020, Nirmal Bang said it expects the auto industry dispatches to be near zero in April.

"We expect minimal to nil wholesales by Auto Original Equipment Manufacturers (OEMs) in the month of April’20 on the back of nationwide lockdown...OEMs have not started actual production at factories due to various limitations and also they don’t expect meaningful improvement in production after May 3, when the lockdown is expected to be lifted," the brokerage said in a note.

"There are limitations at every stage of the supply chain. OEMs are grappling with issues in raw mterial availability, sourcing of components, workforce availability, transportation and driver availability, and lastly most dealerships are closed. Most of the OEMs believe that meaningful production ramp up will only be possible when the dealerships are allowed to open, and vendor network is restored to ensure continuous supply of components," it said. 

According to SIAM estimates, if India’s GDP growth for FY21 falls below 1 per cent, passenger vehicle (PV) sales will likely decline by 20-24 per cent while two-wheeler sales may drop by 27-30 per cent. In the case of commercial vehicles, the drop could be as much as 32-35 per cent while three-wheeler sales may decline by 28 per cent.

In January 2020, Society of Indian Automobile Manufacturers (SIAM) projected auto industry growth of 2-4 per cent, but with the lockdown that has stalled industrial activity, it now expects industry recovery to be slow. SIAM has sought GST cut and incentive based scrappage policy from the government to revive the sector.