BSE Auto index hits fresh 52-week high, zooms 100% from March low

Shares of automobile companies continued their northward movement with the BSE Auto index hitting a fresh 52-week high on Wednesday. The index has more-than-doubled from its March low. The strong rally in automobile stocks is on the expectation of improvement of volumes in the coming quarters on better rural sentiment, low-interest rates, improving finance availability, and a gradual pick-up in business and economic activity.

At 09:42 am, the S&P BSE Auto index was up 0.29 per cent, as compared to a 0.51 per cent rise in the S&P BSE Sensex. The auto index hit a fresh 52-week high of 20,281.70 in intra-day trade today, surging 100 per cent from its 52-week low of 10,141.45, touched on March 24, 2020.

Mahindra & Mahindra (M&M) and Motherson Sumi Systems have seen their share price surging over 200 per cent, while shares of Tata Motors, Ashok Leyland, and Balkrishna Industries, from the auto index, have rallied between 150 per cent and 180 per cent from their respective March low levels.

July-September 2020 quarter (Q2FY21) was marked by a sharp rebound for the auto sector from the washout April- June quarter (Q1FY21) performance. Demand outstripped supply for most major players as production, distribution levels climbed to successively higher levels throughout. Dispatches picked up sharply in September in the run-up to the festive period.

“Going forward, we expect sequential improvement across segments to continue apace – with recovery seen being more rounded vs. rural-focused earlier. The just-concluded festive season witnessed a decent response (especially in PV, 2-W), while industry tailwinds for the tractor segment (record crop production, strong monsoons, sustained government support) remain in place. An increase in prices of key inputs (steel, rubber, etc.) could pressurise Q3FY21E margins, however,” – Pankaj Pandey, Head Research, ICICI Securities said in Q2FY21 earnings wrap.

In October, strong double-digit growth was registered in passenger vehicles (PVs) and two-wheelers (2Ws) due to the ramp-up in production and improving festive retail. In comparison, tractors saw only marginal growth in wholesales, despite better retails, on production constraints, analysts at Emkay Global Financial Services said in sector update.