Nifty Auto index falls 2% in two days after rallying 13% in October

Shares of automobiles companies were quoting lower for the second straight day, with the Nifty Auto index falling 2 per cent in first two trading days of November, as investors turned to profit booking.


In the month of October, the auto index outperformed the market by surging 13 per cent on expectations of strong sales during the festive season. In comparison, the benchmark Nifty50 index gained 3.5 per cent during the month.


At 12:47 pm, the Nifty Auto index was down 1.3 per cent, as compared to a 0.24 per cent rise in the Nifty50 index. Maruti Suzuki India, Hero MotoCorp and TVS Motor Company slipped 2 per cent each, while Mahindra & Mahindra (M&M), Eicher Motors, Bajaj Auto and Ashok Leyland were each down 1 per cent today.


On the contrary, Tata Motors last month had zoomed 51 per cent after the company delivered a stellar operating performance in September quarter (Q2FY20) with sizable improvement in Jaguar Land Rover (JLR’s) EBITDA margin despite challenging business environment for the global automobile industry. Eicher Motors, meanwhile, soared 27 per cent, followed by TVS Motor Company (15 per cent), Maruti Suzuki India (13 per cent) and Ashok Leyland (12 per cent).


Indian auto companies' sales for the month of October witnessed strong performance, in terms of volume across segments, on the back of festival purchases and pent-up demand of past 8-10 months.


According to analysts at Reliance Securities, the industry could see sequential improvement during October-March (H2FY20) period. The performance, however, may remain muted on YoY basis in FY20.


“While there has been a sizable improvement in footfalls in the past few days, there has also been decent conversion of enquiry into sales during festivals. Higher retail performance was supported by festive demand, record-high discounts and pent-up demand of previous 8-10 months. Therefore, industry performance in Nov-Dec’19 would be very crucial to judge the demand sustainability,” the brokerage firm said on monthly auto sector update.


Analysts at Emkay Global Financial Services expect the auto sales cycle to witness a gradual recovery due to the confluence of factors such as increasing discounts, better rural sentiment, lower interest rates, higher government spending and a possible introduction of the scrappage policy.