Auto Stocks back on track as sales zoom – updating by Equity Research Lab | Stock tips

Investors are suddenly buying auto Stocks after companies reported better-than-expected vehicle sales in October, sparking hopes that the trend will continue in the ongoing festive season in November and translate into healthy financials for the current quarter.
Tata Motors led the rally with a 6% gain, driven by strong Jaguar Land Rover sales in the US. The stock has advanced 29% in the past month. The company said on Wednesday JLR's October sales grew 76% in the US from a year earlier.
Kinetic Engineering rose 5.77% to Rs 66.90, Force Motors gained 3.1% to Rs 3,380 while Hero MotoCorp, Ashok LeylandBSE -3.31 %, Mahindra & Mahindra and Majestic Auto and Bajaj AutoBSE 0.18 % gained between 1% and 2% in an otherwise weak market.

The benchmark BSE Sensex lost 38 points on Wednesday. "Most of the major auto players surprised with their October numbers, which were better than expected," said Mihir Jhaveri, an auto analyst with Religare. "This could have led investors to buy the auto stocks." Sales by Indian carmakers increased 22% to about 2.66 lakh vehicles in October, the third-highest monthly level in the history of the country's automotive industry. Analysts expect business at auto companies to improve in the months ahead.

"You might see improvement in OEM volumes both in cars and two-wheelers. With the likely fall in the interest rate and low EMIs, the buying capacity of the customer would stand to increase eventually," said Dhiraj Sachdev, a fund manager at HSBC Global Asset Management. "Most of the stocks are reasonably valued at current levels. Any dramatic improvement in volumes may see some upward re-rating of the stock. “

The fall in prices also leaves surplus money in the hands of the consumers, which could influence decisions on purchasing new vehicles, said experts. "We are positive on the automobile sector as improving outlook on the economy and decline in overall vehicle ownership cost with reduction in fuel costs and softening interest rates is expected to lead to sustainable growth in the automobile industry.” said Prashant Biyani, a research analyst at equity research lab.

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