Auto sector woes to continue as downgrades loom under Covid shadow

Steep rise in input costs cited as the key reason for the revision

The BSE Auto index has been underperforming the benchmarks over the past three months amid multiple headwinds, including weak retails, rising commodity prices, and supply disruptions. The auto index, after outperforming the benchmarks for most of FY21, is down about 9 per cent, as compared to the 2 per cent decline in the Sensex during the last three months. The derating on the one-year forward price to earnings ratio has been higher, about 18 per cent since January. Most analysts believe these headwinds will remain in the near term.

Mitul Shah, head of research at Reliance Securities, says: “Due to the