Nifty Auto index hits over four-month high

Shares of automobiles companies are in top gear with the Nifty Auto index touching over four month high after "above average" monsoon forecast by the Indian Metrological Department (IMD) raised expectations of higher demand going forward.

Mahindra & Mahindra (M&M), Tata Motors, Maruti Suzuki India and Bajaj Auto have rallied between 3%-7% on the National Stock Exchange (NSE).

At 01:07 pm, Nifty Auto index, the largest gainer among sectoral indices, was up 3% at 8,364 as compared to 1.7% rise in the benchmark Nifty 50 index. The auto index hits high of 8,365, its highest level since December 3, 2015, during intra-day on Wednesday.

Ashok Leyland (Rs 113) and Hero MotoCorp (Rs 3,093) has touched 52-week high in intra-day trade, while TVS Motor Company (Rs 326) trading close to its 52-week high of Rs 330 on the NSE.

The Bombay Stock Exchange (BSE) S&P BSE Auto index too surged 3.2% or 579 points at 18,677 as compared to 1.8% gain in the benchmark S&P BSE Sensex.

After two consecutive years of below normal rainfall the IMD has expects monsoon for the years to be 106% of normal with a model error of 5%. We think all the things are falling in place for the Indian economy and see better days ahead, Angel Broking said in a client note.

Good monsoons are likely to improve the rural sentiments leading to demand revival in tractors and two-wheelers. Also, the implementation of the Seventh Pay commission would provide impetus to the sales of two-wheelers and the entry passenger car segments.

“The medium and heavy commercial vehicle (MHCV) sales are likely to continue robust double-digit growth due to better economic environment, soft diesel prices and falling interest rates. We also expect light commercial vehicle (LCV) segment to post better volume growth in FY2017 given the upcycle witnessed in the MHCV segment over the last six quarters and improvement in the rural sentiments,” Sharekhan said in a note.