Nifty Auto outperforms Nifty50 so far in 2024: What’s next?

As we are keen to usher in the new year and keep track of the performance of each sector, it has been revealed that the Nifty Auto index year to date (YTD) has outperformed the bluechip Nifty50 index in . wide margin. Against the Nifty50’s current gain of just over 13 percent, the Nfty Auto during the same period delivered a return of 28 percent.

So, since all 15 sectors have given positive returns, the YTD returns are in the range of

Out of 15 counters, stocks like M&M, Bosch and Samvardhan Motherson led the gainers by up to 76 percent. In contrast, major OEM Tata Motors has only gained about 2 percent so far this year.

Outlook for the automotive industry

Saji John, Senior Research Analyst, Geojit Financial Services summarizing the performance of the auto sector so far said, “In H1, the auto sector is underperforming due to high base and low pent up demand, which has resulted in lower growth compared to estimates. .”

Despite strong growth in recent years and outperforming the benchmark index, the sector’s current valuations are attractive compared to long-term valuations, the analyst noted.

However, any decline in earnings in H2 could have a negative impact on overall sentiment. Looking ahead, the rural outlook, export focus, and new EV launches may benefit select OEMs, but not the industry as a whole. Therefore, we maintain a neutral rating in this sector, he added.

Koustubh Shaha, Co-Fund manager, Wallfort PMS, on the other hand, said the two-wheeler (2W) industry has had a strong quarter so far, with year-on-year (yoy) growth of 36.4 percent in October and 15.8 percent in November. This growth is expected to continue due to the recovery of the rural economy, supported by good monsoon conditions. The passenger vehicle (PV) industry also performed well in October, showing a yoy growth of 35.6 percent, although November was mixed, with brands such as Maruti, M&M, and Tata Motors reporting single-digit growth in the mid-teens.

So given the current momentum, Shaha believes the auto sector is expected to benefit from a potential interest rate cut by the RBI in Q4 and a modest economic recovery, which should support PV sales. Overall, the next quarter is expected to be good for the auto industry, he added.

Atul Parakh, CEO of Bigul believes that the Indian auto sector is expected to continue its positive momentum in FY25, driven by several factors including:

Growth in 2 wheeler segmentst- The two-wheeler market is expected to experience high single-digit growth due to strong rural demand and new product launches.

EV Adoption- With increasing investment in EV technology and infrastructure, companies like Hero MotoCorp are positioning themselves to capture market share in this emerging segment.

Economic Stability: The general economic recovery after the pandemic and the government’s plans to improve infrastructure are likely to support the growth of car sales.

It is expected to have a strong outlook as November car sales at those dealerships remain weak.