Now some of the problems of the auto sector seem to be going away and the demand is increasing. With the demand for passenger vehicles, commercial vehicles can also see better growth going forward.
Best Auto Sector Stocks: The automobile sector has been an underperformer for a long time. The sector has been hit hard due to the lockdown due to COVID 19, disturbance in the supply chain and shortage of semiconductor chips. In the last festive season too, muted growth has been seen in this sector. However, now some of the problems of the auto sector seem to be going away and the demand is increasing. Macro conditions in the country are getting better than before. The Omicron variant has also languished due to massive vaccination. Along with the demand for passenger vehicles, there is also a demand for commercial vehicles. Brokerage house Emkay Global has given a positive view on the sector and has suggested investing in some quality stocks.
Brokerage House’s Top Picks and Targets
Tata Motors (TP: Rs 575)
Ashok Leyland (TP: Rs 160)
Bajaj Auto (TP: Rs 4490)
Minda Industries (TP: Rs 1230)
Bharat Forge (TP: Rs 950).
cyclical uptrend till next year
Brokerage house Emkay Global says that there is a recovery in the sector and a cyclical uptrend can be seen for the next 3 years. The brokerage house says that the kind of trend that is going on in the commercial vehicle segment, the upward momentum is seen continuing in the month of February. At the same time, growth momentum remains in the passenger vehicle segment as well. However, there is pressure in the two wheeler and tractor segment due to high base effect and weak customer sentiment. The brokerage house has kept the overall view on the sector positive.
Semiconductor shortage going away
The brokerage says that the pressure on the auto sector in the last few months was due to the shortfall of the chip. Due to the shortage of semiconductors, the production was reduced even after the order. But now this problem is getting resolved now and after COVID 19 the supply network is also better than before.
How much volume growth in which segment?
According to the report, the CV industry volumes seem to be improving. Chip supply has improved for LCVs and there is better demand for ICVs. On the other hand, 2W industry volumes may remain weak on a year-on-year basis. Volumes should improve with healthy orders and better supply chains in the PV industry. The domestic volume of TTMT and MM is expected to grow by 51% and 23% on a yearly basis. However, the volume of MSIL may remain low by 9% in February. Tractor volumes may also decline in February. The domestic volume of MM may drop by 30% and that of Escorts by 35%.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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