The Indian auto industry is grappling with many such difficulties which are beyond its control. COVID-19, chip shortage and Russia-Ukraine war are all similar problems that have been plaguing the auto industry for the last two years. With the first wave of COVID-19, great difficulties arose for the auto industries.
Due to the lockdown, companies had to shut down their production, but with the improvement in the conditions of COVID, there was an improvement in this sector due to pentup demand, but then the second wave of Corona and the problem related to the supply of semi-conductors again attacked the auto industries. done. Due to which the recovery coming in the sector came to a halt once again and when the situation seemed to be improving once again, the war between Russia and Ukraine once again attacked the revival of the sector.
The impact of the Russo-Ukraine war on the auto industry
Auto industry is facing many challenges at once. Recently, the biggest challenge before it has arisen from the Russo-Ukraine war. This war has set commodity prices on fire and created problems in the supply chain. Crude oil prices seem to be touching the sky.
Motilal Oswal’s Sneha Poddar It says that the sharp rise in commodity prices will affect the margins of the companies. Apart from this, after the state elections, the prices of petrol and diesel may see an increase of 15-20 percent. Due to which the demand of the auto sector may be adversely affected. Sneha Poddar further said that due to the Russo-Ukraine war, the supply of semiconductors is likely to be adversely affected again. Because both Russia and Ukraine are major producers of metals and gas used in the production of semiconductors. Due to this fight between Russia and Ukraine, the supply of these raw materials to the semiconductor production units may be hampered.
However, even in these adverse conditions, the passenger and commercial vehicle segment is showing comparatively strength. Despite all the challenges, their demand is likely to remain bullish going forward.
With the rise of 1300 points in the Sensex, the shares of DLF also showed enthusiasm, these shares ran more than 5% in intraday
Sharekhan’s Sanjeev Hota says that the demand outlook looks very good despite supply constraints in the near term in the passenger vehicle segment. People are moving towards personal mobility. Along with this, the market is also getting support from new launches. On the other hand, in the commercial vehicle segment, the economy is likely to pick up on the back of recovery coming on the back of construction and infrastructure sectors.
What should be the investment strategy in auto stocks
If we look at the BSE Auto Index, it has lost 19 per cent from its peak of 26,814.26 on 17 January 2022 to 08 March 2022. The auto sector has underperformed the broader market index. So, would it be right to bet on this sector? Talking on this, Vasudev Banerjee of ICICI Securities says that whether it is market cap or earnings, in any case, one should not try to catch a falling knife. This argument is also true for auto stocks.
On the other hand, Sanjeev Hota of Sharekhan says that from the investment point of view, the valuation of some auto stocks is now looking attractive after the big fall, but our advice would be to bet only on the passenger vehicle and commercial vehicle segment as compared to other sectors. I am looking for PV and CV demand scenario.
Darshan Gangar of Axis Security says that after a huge fall in the auto space, many stocks are now getting at a good price. Now the strategy of buying in the fall should be adopted. Ashok Leyland, Maruti Suzuki and Bajaj Auto are their top picks.
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