Eicher, Maruti, Tata Motors, M&M Shares In Deep Red On October 3; Why Auto Stocks Are Down?

Auto stocks were tossed around by a band of bears with Nifty Auto index toppling to erase its $16,000 critical mark. Heavyweights Eicher Motors, Maruti Suzuki, Tata Motors, Hero MotoCorp, and M&M were all in deep red, dragging the overall index and market. The selling pressure in auto stocks comes after their September sales data which was a mixed bag with two-wheelers and tractors underperforming, while and SUVs along with cars hitting all-time high on festive zeal.

At the time of writing, Nifty Auto index dipped by 183.20 points or 1.13% to trade at 16,001.20. The index has slipped by at least 1.4% to touch an intraday low of 15,955.90.

Eicher Motors was the top loser by falling nearly 3% on the index after it posted decline in its motorcycle brand Royal Enfield's sales. Heavyweights like Maruti Suzuki, Tata Motors, and M&M shed more than 1% to 2%. Balkrishna Industries also dipped by over 1%.

Meanwhile, stocks like Hero MotoCorp, Bharat Forge, Bosch, Bajaj Auto, and Sona BLW Precision were also in red with downside ranging from marginal to nearly 1%.

On the contrary, MRF was the top gainer surging by 0.5% followed by Ashok Leyland, Tube Investments and TVS Motor who were also in green but with marginal upside. Meanwhile, Motherson Sumi shares were trading flat.

According to Saji John, Senior Research analyst at Geojit Financial Services, September auto sales came with a mixed bag, where cars and SUVs hit an all-time high on festive fervour and continued to surge in demand as the largest players heavily stocked up their dealerships ahead of Navratri and Diwali."

John added, the PV industry is set to hit the milestone of 4 million units for the full year, surpassing the 3.8 million units achieved last year. However, the two-wheeler industry continues to see lukewarm growth, though Hero Motor, TVS, and Royal Enfield hope that demand will start picking up as the weeks pass.

In case of commercial vehicles, John pointed out that robust infrastructure push, better replacement demand, and growth in the e-commerce segment continue to benefit the segment.

Geojit's analyst expects normal volume growth for the sector and some consolidation in the near term due to a significant rally compared to the broader market.

Furthermore, in regards to tractor sales, John said, the reason for the underperformance was a high base and an uneven monsoon, which has led farmers to be more cautious about buying new tractors. In addition, the postponement of the festive season to Q3 has also contributed to the decline in sales. The outlook for the sector is neutral due to the high base last year, owing to record tractor sales in FY23.

However, we believe the onset of the festive season and the monsoon recovering in September to near normal level, to support rabi sowing, especially in the Central, Northern, and Western regions. Meanwhile, the sector is trading in premium on a trailing basis in anticipation of margin expansion due to a price hike and lower input costs.