Auto stocks mixed after January sales data. What's in store?

Auto shares gave mixed responses on Thursday to companies’ report of a decent set of vehicle dispatches for January.

Car sales got off to a good start with auto majors such as Maruti Suzuki, Tata Motors, Mahindra and Mahindra, reporting growth in vehicle sales numbers. While sales of commercial vehicles and utility vehicles also rose in double digits, demand for entry-level cars remained muted.

Margins are also higher for the larger and pricier UVs. High inflation has hit demand in rural India, which usually accounts for the bulk of entry-level vehicle sales across segments.

Total domestic passenger vehicle sales were at 1,55,142 units as compared to 1,36,442 units in the corresponding period of previous year, registering 14% growth.

"We witnessed a better January than December for passenger vehicles. As expected, the fourth and the last quarter of the year looks strong for the PV segment as the chip shortage issue eases further and new launches on both ICE and EV sides shall take place," said LKP Securities.

Maruti Suzuki has reported 12% growth in sales at 172,535 in January, with UVs sales seeing 33% jump. Maruti Suzuki was trading 0.75% higher at Rs 8,834 on the NSE.

Meanwhile, rival Mahindra and Mahindra reported 66% growth in utility vehicle sales, and tractor sales at the company were up almost 28%. The stock was down 0.26% at Rs 1,348.55 apiece on the NSE.

The commercial vehicle (CV) segment reported double-digit growth in January, with sales at Eicher and Ashok Leyland rising more than 32% each. Eicher Motors lost the most among stocks during the day, down 2.82%, while Ashok Leyland gained the most by 2.78%.

Market leader Tata Motors, however, posted 7.1% decline in CV sales. Tata Motors' total domestic dispatches grew 6.4% to 81,069 units in January. The scrip is down about 0.59%.

Meanwhile, domestic sales at two-wheeler maker Bajaj Auto fell more than 21%, while rival TVS Motor Company reported a 3.1% increase, even as exports remained weak. Eicher Motors, which produces the Royal Enfield brand of motorcycles, reported 27% jump in monthly sales.

Bajaj Auto showed weakness on the counter following a decline in sales and the stock is trading 1.61% lower, while TVS Motor also dropped 1.71%.

"With the Budget outlying an increase in capital expenditure for infrastructure activity, CVs should continue to do well, especially medium and heavy commercial vehicles," said Mansi Lall, research analyst at Prabhudas Lilladher.

"We remain positive on the sector. However, our choice is in the following order — PVs , CVs and 2Ws," said LKP Securities.

Stocks specifically, within the two-wheelers, the brokerage is positive on Bajaj Auto and Hero MotoCorp. On the PV side, it is optimistic on Mahindra and Mahindra, and in the commercial vehicle segment, the brokerage expects Ashok Leyland to do well.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)