Auto stocks on a roll; Tata Motors hit 52-week high, M&M & Hero MotoCorp record high

Shares of automobiles companies are on a roll with the S&P BSE Auto index and Nifty Auto index hitting their respective lifetime highs in an otherwise weak market on expectation of a recovery in second half, driven by a normal monsoon and demand post the implementation of the 7th Pay commission.

Hero MotoCorp (Rs 3,289) and Mahindra & Mahindra (Rs 1,485) have touched record highs, while Tata Motors (Rs 501) hit a fresh 52-week high on the BSE during intra-day trade. Bajaj Auto (Rs 2,695) and Maruti Suzuki India (Rs 4,450) were trading close to their 52-week highs.

At 11:19 AM, S&P BSE Auto index at 20,498 and Nifty Auto index at 9,238 were trading higher by 1.3% each, as compared to 0.5% decline in the benchmark indices.

“Stocks are rallying on expectations of a recovery in 2H (October-March), driven by a normal monsoon, implementation of the 7th Pay commission and expectations of further reforms in the upcoming monsoon session of parliament. Society of Indian Automobile Manufacturers (Siam) expects the industry to grow in excess of the earlier guidance of 6-8%,” J.P. Morgan said in a report.

Karvy Stock Broking expects volume recovery by mid-FY17 across the segments amid favourable monsoon benefitting rural India as well as overall economy.

“We expect commercial vehicle (CV) cycle uptrend to continue for next 2-3 quarters, while we also expect sharp rebound in tractor sales and its strong outperformance to other segments over the same period,” the brokerage house in Q1 results preview.

Mahindra India