The Indian auto sector has rebounded strongly after a period of underperformance through August and early September. Two-wheeler stocks, in particular, have driven the recovery, as market expectations of improved sales during the festive season, along with good rainfall, boosted investor sentiment. The Reserve Bank of India's (RBI) potential rate cut in the upcoming monetary policy meeting has also played a role in this resurgence, leading to positive momentum in auto stocks.
Two-wheeler stocks lead the charge
The Nifty Auto index surged by nearly 5% in September, raising its year-to-date (YTD) gain to 49%. Notably, Samvardhana Motherson emerged as the top performer, with a staggering 110% surge, followed by Bajaj Auto and Mahindra & Mahindra (M&M), which have posted gains of 86% and 84%, respectively. Other major gainers include TVS Motor, Hero MotoCorp, Ashok Leyland, and Maruti Suzuki, all showing impressive growth ranging from 30% to 45% so far this year.
Rural demand and the push toward electric vehicles (EVs) have significantly boosted the two-wheeler sector. The increased focus on EVs, coupled with new model launches at competitive prices, has strengthened market positioning for many companies. Analysts are optimistic that this positive trend will continue, especially with government initiatives aimed at boosting the rural economy.
Impact on share market investment
For investors focused on share market investment, the auto sector offers a promising opportunity. The recovery in the two-wheeler segment, which started in FY23, is expected to maintain its momentum through FY25, driven by factors such as a favorable monsoon and improved consumer sentiment. Increased government spending and rising demand for personal transportation are further expected to fuel long-term growth in this sector.
Passenger vehicle stocks lagging behind
While the two-wheeler sector is witnessing strong growth, passenger vehicle (PV) stocks, except for M&M, have underperformed. Companies like Maruti Suzuki and Tata Motors have faced challenges due to sluggish sales growth and inventory buildup. However, M&M’s strong performance in the utility vehicle market, supported by strategic launches, has allowed it to outperform its peers.
Despite the slowdown in PV sales, optimism remains for a potential sales revival, driven by new model launches and discounts offered by automakers. For investors looking to make informed share market investments, M&M’s robust demand for SUVs and strong sales performance make it an attractive option.
In summary, the Indian auto sector's resurgence, particularly in two-wheeler sales, along with hopes of an RBI rate cut, is driving optimism in the stock market. Investors looking to capitalize on this growth may find significant opportunities in both two-wheeler and utility vehicle stocks.
For android only