Auto stocks on an upswing; M&M, Tata Motors top gainers on index

• Shares of automobile companies top gainers on Monday on expectation of strong sales in July.
• Analysts expect the auto industry to witness double digit growth in FY23 supported by easing commodity and fuel prices.
• Most companies will release their monthly sales numbers for July this week.
• M&M and Tata Motors top two gainers on Sensex and Nifty 50.

Indian markets have started the week on a high, thanks to auto stocks that have been rising on expectations of strong July sales data.

Most companies will release their monthly sales numbers for July this week, which will provide insights on rural demand and inflation impact on the economy. Analysts have a positive outlook on demand recovery from rural areas.

Improvement in semiconductor chip supplies, favorable monsoon and upcoming festive seasons to bring expected relief.

“We expect the industry volume to improve gradually every month over the next 3-4 months backed by favourable monsoon led rural recovery and festival season kicking in 2QFY23. We expect retail demand to remain strong in FY23. Ongoing global geopolitical issues amid Russia Ukraine war have a negative impact on businesses environment, which creates negative demand sentiment for consumption,” said a report by Reliance Securities.

Analysts at CRISIL believe that passenger and commercial vehicles will drive volume growth in FY23, with two wheelers showing moderate recovery and tractor demand remaining moderate.

Softening commodity prices and stable fuel prices are also expected to offer support.

“We expect the automobile industry to witness double digit growth in FY23, while we expect medium and heavy commercial vehicles and three wheeler segments to outperform with over 30% volume growth in FY23,” said the report.

Sales data by two-wheeler and rickshaw manufacturer Bajaj Auto indicates some pain in the two-wheeler market. Its total sales fell by 4% as its two-wheeler sales slipped 5%; even as its commercial vehicles sales rose by 3%.

Meanwhile, Maruti Suzuki’s total sales rose 8% on year to 175,916 units and domestic sales grew 10% to 155,605 units in July 2022. However, the auto major said that “the shortage of electronic components had a minor impact on the production of vehicles, mainly in domestic models.”

Maruti’s mid-size models like Ciaz and SUV models like Ertiga, S-Cross, XL6, Brezza saw decline in sales in July as compared to last year.

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