Nifty Auto soars 75% in FY24; what lies ahead for the sector?
In Q3FY24, automotive companies experienced favorable year-on-year volume growth across multiple segments. This increase in volume was further reinforced by improved realisation, attributed to the implementation of premiumisation strategies and enhanced net pricing. Additionally, favorable margin performance was achieved through a beneficial product mix and advantages derived from the easing of commodity prices.
Read here: Tata Motors vs M&M: Which auto major should you pick for the long term?
The Nifty Auto index has surged 75 percent in the last 1 year and almost 16 percent in 2024 YTD. In comparison, the benchmark Nifty has advanced over 29 percent in the last 1 year and 3.5 percent in 2024 YTD.
The auto index rose 5 percent in March, extending gains for the 5th straight month since November 2023. In this period, it rallied 34.5 percent. In 2024, it has jumped 3.3 percent in January and 6.2 percent in February.
Constituents
In the last one year, all constituents of the Nifty Auto index were positive with 4 giving multibagger returns to their investors. Tata Motors soared the most in FY24, up 139.5 percent, followed by Bajaj Auto, up 135 percent, TVS Motor, up 101 percent, and Hero Moto, up 100 percent.
Apart from these, Samvardhana Motherson, Sona BLW, M&M, MRF, Bosch, and Maruti Suzuki also rallied over 50 percent each.
Meanwhile, Bharat Forge, TI India, Eicher Motors, Ashok Leyland, and Balkrishna Industries also advanced between 18 and 49 percent.
With such robust performances by the auto stocks in FY24, will FY25 follow a similar trend? Between passenger vehicles (PVs), commercial vehicles (CVs), and two-wheelers (2W), which segment will lead? Here’s what experts believe –
Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy
The trend is expected to continue in the auto space owing to favourable market demand and the anticipated rate cuts. Technically, the two major companies in the space, Tata Motors and Maruti, have just begun and have huge potential for further rally. However, the auto index has run up too fast too soon, so it may pause for a while before starting the next leg of the rally. In the auto space from a technical point of view, I will prefer passenger vehicles over other segments.
Akshay Karwa, Research Analyst, Anand Rathi Institutional Equities
Replicating last year’s performance across segments will be challenging due to various factors such as inflationary pressures and mature market conditions.
2Ws – Anticipating a 14 percent growth in the 2W segment despite high inflation indicates strong underlying demand drivers, potentially stemming from factors like increased urbanisation, transportation needs, and preference for affordable mobility solutions.
PVs– Projected growth of 5-6 percent in the PV segment suggests a steady but moderate expansion, driven by factors such as consumer preferences, economic conditions, and regulatory incentives for electric vehicles.
CVs and Tractors would be weak.
Ashwin Patil, Senior Research Analyst at LKP Securities
The surge which we have seen in the last year may not be seen this year, because first of all the base is high. Secondly, certain segments like MHCVs shall report negative growth this year with a slowdown seen in it led by high base and cyclicality. PVs shall see a higher single-digit kind of growth led by fewer model launches and a slightly higher base. It is an election year and with the weak monsoons seen last year, the impact can be seen on PVs as they too depend greatly on rural markets. Any significant pick-up can be seen in the second half led by the SUVs. Small car segment underperformance shall hit the PV industry as it forms the bulk of it.
The best sector to perform this year should be the 2Ws, considering its low base, premiumisation, scooterisation, rapid electrification, and new launches. Good monsoon can further trigger growth in the rural segment in the second half of the year. A robust marriage season may offset the expected softness led by elections. We foresee 12-15% growth in 2Ws for FY24.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 01 Apr 2024, 02:11 PM IST
