Chip Crisis Easing, Supply Chain To Normalise Sooner: Report

In a weak market on June 6, 2022 whereby indices amid weak global cues have toppled with Nifty down by over 110 points and broader markets trading with further more weakness. Among Nifty sectoral indices, there were gains seen in the auto pack, which too shed off.

Nevertheless as per the media reports there is a positive report on auto companies. "Some marquee global auto OEMs have started to operate their
manufacturing plant at near full capacity utilisation levels on the back of meaningful improvement in chip availability and expect the supply chain to normalise sooner than expected", notes the brokerage firm.

On the development, ICICI Direct says that "this comes as a positive development for the entire automobile space benefitting players across the OEM as well as ancillary supply chain. Since this is first being witnessed in key global markets, it is set to benefit global ancillary players like
Motherson Sumi (now SAMIL), Bharat Forge among others. We await management commentary from Indian players on the same. Separately, post
imposition of export duty on steel, domestic ferrous metal prices have corrected ~8%, which will help improve the margin profile at the ancillary players followed by the OEMs in the medium term".

On the move, though as of now, there is not seen positive traction as Motherson Sumi in trade today is down by over 3%.