Nifty Auto rallies 5% in 3 sessions, Eicher Motors leads the charge

While the Indian benchmark indices moved back and forth during the first week of the current year, auto stocks have managed to beat the volatility, as investors were impressed by the December wholesale numbers, which came in above Street estimates.

It was the passenger vehicle stocks that drew significant interest from Dalal Street investors, as major carmakers posted double-digit sales growth, led by a positive response to recent UV launches and CNG vehicles, with Maruti Suzuki leading the way.

Both the entry-level segment and the UV segment witnessed strong sales growth of 29% and 21% YoY, respectively. However, the 2W numbers, barring Eicher Motors, disappointed the Street, impacted by inventory correction.

Following the December sales figures, analysts retained their positive outlook on the PV sector, which also boosted market sentiment, driving the stock prices higher. Over the last three trading sessions, the Nifty Auto Index surged 5.12%, with Eicher Motors leading the charge, rising 10%. It was followed by Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Ashok Leyland, TVS Motor, Hero MotoCorp, and Bajaj Auto, all of which were up between 3% and 9.3%.

Meanwhile, global brokerage firm CLSA has added Tata Motors to its India-focused portfolio, as it believes the company is adequately accounting for risks related to a slowdown in commercial vehicle sales and the Jaguar Land Rover (JLR) portfolio.

Near-term 2W demand depends on new launches and rural sentiment

In December 2024, 2W OEMs reported a decline of 3% YoY on an overall basis (domestic + exports). This was driven by a pickup in exports (strong double-digit growth), partially offset by inventory correction in the domestic channel.

In its recent report, domestic brokerage firm JM Financial stated that 2W wholesale performance remained steady, led by strong double-digit growth in export volumes. Domestic wholesale volumes were impacted by inventory correction. It stated that near-term 2W demand remains contingent on the response to new launches and rural sentiment.

E2W momentum is expected to continue, driven by OEMs' focus on new affordable launches, as well as production and distribution expansion.

PV OEMs’ (total) volumes increased by double digits on a YoY basis in December, 4% above brokerage expectations. This was led by continued traction in the SUV segment and strong double-digit growth in exports.

Although the December numbers exceeded street estimates, the PV industry posted moderate growth in CY24, and carmakers expect to reach a sales volume of 4.3 million units in Q3 FY25, with strong growth in the SUV segment and sustained demand for emission-friendly powertrains.

In the CV segment, volumes grew by low single digits YoY. Fleet operators' sentiment remains stable, supported by expected government spending on infrastructure development. Healthy demand from STUs and private operators continues to be reflected in strong sales in the bus segment, the brokerage noted. 

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