Maruti Suzuki, Tata Motors to Ashok Leyland: Why auto stocks are in action today — explained

Maruti Suzuki, Tata Motors to Ashok Leyland: Why auto stocks are in action today — explained

As the monthly auto sales numbers for July 2023 are awaited, auto stocks are showing positive movement in the stock market. Major automobile companies like Maruti Suzuki, Ashok Leyland, Tata Motors, Hero MotoCorp, Escorts Kubota, and Force Motors are trading in the green zone. Market experts are anticipating better sales figures from most of the auto majors in July, as the second quarter of the fiscal year 2023-24 begins.

The expectation of improved sales in July is driven by the typical trend of auto sales moving upward in the second quarter of the fiscal year. With July being the first month of Q2FY24, market analysts are hopeful for positive results. However, they caution that the sequential growth may be in the single-digit range due to a higher base size from the previous period. Nevertheless, the market is optimistic about the year-on-year (YoY) performance, expecting double-digit growth in monthly auto sales when compared to July 2022.

YoY growth in auto sales is an essential indicator of the industry’s recovery and performance. It reflects the sector’s ability to rebound from the challenges and disruptions faced in the past. The positive movement of auto stocks ahead of the sales numbers indicates the market’s confidence in the industry’s recovery and growth prospects.

Investors and market participants will closely monitor the actual sales figures released by the companies to gauge the industry’s overall performance and assess the impact on the respective stock prices. Monthly auto sales data can provide valuable insights into the broader economic trends and consumer sentiment, making it a critical aspect for the financial markets.

The uptrend in auto stocks can be attributed to the anticipation of positive monthly auto sales numbers for the month of July 2023. Anuj Gupta, Vice President of Research at IIFL Securities, explains that the market is showing buying interest in auto stocks ahead of the release of the monthly sales data.

The positive sentiment towards auto stocks is fueled by the overall economic outlook, which is perceived to be in a sound position. As the economy improves, consumer demand for automobiles is expected to rise, leading to better quarterly financial performance by auto companies. The expectation of improved quarterly numbers is translating into the belief that the monthly sales figures for July will also show a spike.

Investors and traders often respond to such expectations and market sentiments, leading to increased interest and buying activity in the stocks of auto companies. Positive quarterly and monthly sales numbers can indicate the industry’s resilience and growth potential, further boosting investor confidence in the sector.

As economic conditions improve and consumer spending rebounds, the demand for automobiles is likely to pick up, benefiting the auto companies and their stock prices. However, it’s important to note that actual sales figures will determine the extent of the industry’s performance and whether the expectations are met or surpassed.

Market participants will closely monitor the release of the monthly auto sales numbers to assess the impact on individual auto stocks and the overall market sentiment. These numbers can have a significant influence on short-term trading decisions and also provide valuable insights for long-term investors assessing the health of the auto sector.

According to Avinash Gorakshkar, Head of Research at Profitmart Securities, the market is expecting improved monthly sales from various auto companies, particularly in the two-wheeler, private car, and commercial vehicle segments. However, the expectation is that these better sales numbers will be delivered by the market leaders in their respective segments.

In the two-wheeler segment, market leaders like Hero MotoCorp, Bajaj Auto, and TVS Motor are anticipated to show positive sales figures. These companies are likely to outperform their peers if they manage to meet the market’s expectations for monthly sales data.

For the private car and commercial vehicle segments, Tata Motors and Mahindra & Mahindra (M&M) are expected to present better sales numbers. In the commercial vehicle segment, Ashok Leyland is also expected to demonstrate improved sales performance.

It is important to note that the market’s expectations are based on the perception that the economy is in a sound position, which could lead to increased consumer demand for automobiles. However, actual sales figures will determine the extent to which these companies can meet the market’s expectations and potentially outperform their competitors.

Investors and market participants will closely monitor the release of the monthly sales data from these auto companies to gauge their performance and assess the industry’s overall health. Positive sales numbers from the market leaders can have a significant impact on the respective companies’ stock prices and may influence investor sentiment in the broader auto sector.

According to Avinash Gorakshkar of Profitmart, the two-wheeler segment has higher volume, making it an attractive choice for investors. He recommends considering investments in Hero MotoCorp, Bajaj Auto, and TVS Motor in the two-wheeler segment.

For medium to long-term investors, Gorakshkar suggests looking at Ashok Leyland, Mahindra & Mahindra (M&M), and Tata Motors as potential ideal “buy on dips” stocks in the auto segment. This advice implies that investors should consider purchasing these stocks when their prices experience temporary declines or dips in the market, as these companies are expected to perform well in the long run.

The “buy on dips” strategy is commonly used by investors who believe in the long-term potential of certain stocks but wish to enter or add to their positions at more favorable price levels during short-term market fluctuations.

As with any investment advice, it is essential for investors to conduct thorough research, consider their own risk tolerance and financial goals, and seek advice from financial professionals before making any investment decisions. Stock market investments carry inherent risks, and it is crucial to approach investing with careful consideration and a well-defined strategy that aligns with one’s financial objectives.