Auto stocks could disappoint in Q2, with demand faltering due to various factors affecting the two-wheeler and passenger vehicle segments. Additionally, Axis Bank and Wipro remain in focus on their Q2 results, reflecting both bullish and bearish cases for their respective performance.
Two-wheeler sector
The two-wheeler industry, which once held promise for lifting the auto sector, is now facing a potential slowdown. Bajaj Auto recently reduced its growth forecast for two-wheeler sales in India to a modest 5%, compared to the earlier prediction of 5-8%. This revision comes after September’s two-wheeler sales took a significant hit, dropping 10% month-on-month and 8.5% year-over-year.
Weak consumer sentiment, low inquiry levels, and a reduction in foot traffic have contributed to this decline. Additionally, seasonal factors such as the Shraddh period, Pitrapaksha, and heavy rains led to delayed purchases, creating a subdued buying environment. Investors looking to buy shares online should remain cautious amid these developments.
Passenger vehicle sales see a steep decline
The passenger vehicle (PV) segment has also been impacted, with sales falling by 10% month-on-month and a striking 18.81% year-over-year in September. The combination of seasonal lulls, adverse weather conditions, and an overall sluggish economy has led to a sharp decline in consumer interest.
Dealers are now faced with high inventory levels, sitting on approximately 7.9 lakh vehicles worth ₹79,000 crore. The inventory stretch has reached 80-85 days, according to FADA data. With the festive season approaching, both dealers and original equipment manufacturers (OEMs) are hoping for a surge in sales, particularly in rural markets where agricultural conditions are favourable.
For investors looking to buy shares online, the auto sector’s performance in October will be crucial. A strong October is needed not only to clear excess inventory but also to create a stable base for growth throughout FY25.
Axis Bank Q2 performance
Axis Bank has delivered a mixed performance in Q2, with both positive and negative indicators. The bank’s asset quality improved during the quarter, which helped alleviate concerns that had arisen after the Q1 results. Credit costs were significantly lower on a quarter-on-quarter basis, and one-off gains were used to strengthen contingency provisions.
However, Axis Bank is facing challenges due to falling deposit growth and low credit offtake, which could impact the lender in the short term. Loan and deposit growth remained soft during the quarter, and core revenue growth was subdued. These factors may raise concerns for investors who are considering buying shares online, as growth outlooks appear to be uncertain for the bank.
Wipro shows earnings improvement
Wipro’s shares recently gained, with the IT company reporting earnings that exceeded market expectations on all major fronts. This marked Wipro’s first sequential revenue growth in six quarters, which contributed to a positive market reaction. The company’s deal pipeline is strong, driven by vendor consolidation opportunities and AI-powered solutions. Wipro’s BFSI (banking, financial services, and insurance) vertical saw a modest improvement of 0.3% quarter-on-quarter, further boosting investor confidence.
Investors looking to buy shares online should carefully consider these factors when evaluating Wipro’s potential.
Festive season to test auto recovery
With demand faltering in both the two-wheeler and passenger vehicle sectors, the upcoming festive season will be a key period for the auto industry. The industry is banking on rural markets, where favourable agricultural conditions and improved cash flow are expected to drive demand.
For now, dealers and OEMs are cautiously optimistic about the festive season sales. However, the road ahead remains uncertain, and investors looking to buy shares online should closely monitor how the auto industry performs in October.
Factors affecting investor sentiment
The overall outlook for the auto sector is one of caution, with concerns around weak demand, high inventory levels, and seasonal impacts affecting both two-wheeler and passenger vehicle sales. As Axis Bank and Wipro remain in focus, investors looking to buy shares online should keep a close eye on key metrics such as credit growth, deal pipelines, and operating margins.
The performance of the auto sector and these companies during the upcoming festive season could set the tone for the rest of FY25. Investors are advised to be mindful of potential risks and opportunities when making decisions to buy shares online.
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