Shares of auto companies were trading with up to 19 per cent cut on the NSE on Thursday as panic selling continued amid growing fears of economic dislocation due to pandemic Coronavirus (Covid-19).
Nifty Auto index hit a six-year low today. At 10:33 am, the index was trading 7.5 per cent lower at 5,102 levels with 14 out of 15 components declining. In comparison, the benchmark Nifty50 index was hovering around 8,000 levels, down 466 points or 5.5 per cent.
Among stocks, Ashok Leyland bled the most - falling up to 19 per cent in the trade. Bharat Forge, Maruti Suzuki India (MSIL), and Mahindra & Mahindra (M&M), all were down over 11 per cent each. Other stocks that were under pressure included Hero MotoCorp, Tata Motors, and Bajaj Auto, among others. These stocks were down in the range of 3.5 - 5 per cent. On the other hand, Motherson Sumi was trading over 1.6 per cent higher at Rs 62.60 apiece on the NSE.
Edelweiss Securities, in its research report, says that the near-term outlook of Motherson Sumi remains unclear and difficult to ascertain. Given that capex cycle has peaked and the company has been focusing on free cash flow (FCF), it may not shy away from acquisitions like in 2009 when it acquired SMR, it said.
"While we do expect a cut in our earnings, given the fluidity of the situation we are in the process of evaluating the extent of cut. However, current valuations assume Motherson Sumi (MSS) will not be able to navigate the current crisis, which we believe is extreme risk aversion. We maintain 'BUY'," the brokerage said. The target price stands at Rs 143.
Post the coronavirus outbreak, the correction in the auto index is now closer to that witnessed during the 2008 Global Financial Crisis (GFC) period, said HDFC Securities in its report dated March 16.
"The index is down 47 per cent currently against 55 per cent in 2008. Valuations of select two-wheeler and commercial vehicles (CV) stocks are approaching levels that were witnessed during the GFC. Any recovery in sales though will be dependent on several factors including extent of pass through of crude prices, BS-VI related price hikes, etc," the report added.