Budget 2023: Auto cos rally on higher capital outlay, vehicle scrappage plan

Auto stocks rallied up to 3% on BSE after the Union Finance Minister Nirmala Sitharaman in Budget announced a capital investment of Rs 10 lakh crore for FY24E, up 33% YoY.

Shares of Sona BLW Precision Forging surged over 3% on BSE. Bharat Forge, MRF and Balkrishna Industries rose up to 2%. Eicher Motors, Hero MotoCorp, Ashok Leyland and Tata Motors were also trading higher.

The announcement of a capital investment outlay of Rs 10 lakh crore for FY24E is a positive development for domestic commercial vehicle space and more so for the medium and heavy commercial vehicle (M&HCV) domain. Positive for Tata Motors and Ashok Leyland.

Further, the proposed spending to scrap old government vehicles drove shares of automobile companies higher.
In order to give a further fillip to electric mobility, the government has given customs duty exemptions to import capital goods for lithium-based batteries.

"Increase in tax exemption limit with consequent more disposable income for Indian taxpayers in Union Budget 2023-24 is a positive development for domestic automobile space and shall spur growth for the domestic passenger vehicle industry. Positive for Maruti Suzuki, M&M, and Tata Motors in our coverage universe. It is also positive for the premium motorcycle segment with Eicher Motors as key beneficiary with the popular Royal Enfield franchise," said brokerage firm ICICI Direct.