Auto sales remain in line or better than estimates; festive season to drive sales despite chip shortage, inflation- 5 auto stocks to buy

Auto is one of the sectors that has been driving rally on Dalal Street amid volatility. The Nifty Auto index saw buying interest even on Thursday when the market traded lower amid weak global cues. In the past one week as on September 1, 2022, the index gained around three per cent and emerged as one of the leading gainers on the benchmarks anticipating robust August auto sales numbers.   

Auto sales numbers largely came better than estimates or in line with the estimates year on year (YoY) of Zee Business. As per our estimates, passenger vehicles (PVs) numbers were better than expected, while Commercial vehicle data was as per our estimates. Likewise, the two-wheeler segment and tractors also recorded healthy sales figures and came in better than our estimates yoy.  

Earlier, brokerage firm Sharekhan was bullish on the sector despite near-term challenges such as rising inflation and chips shortage.  

It expected demand for passenger vehicle (PV) and two-wheeler (2W) segments to remain robust in the medium term, led by improving economic prosperity in urban and rural markets, ahead of the festive season.  

"We expect 2W volumes to recover, especially in the entry and executive motorcycle segment. New launches in the PV and 2W segments are likely to keep excitement in the medium term.," it said.  

Though the brokerage house remained bearish on tractors sales and expected it to report muted growth, led by seasonality and high base, it feels improving macro activities will continue to support CV sales going forward. "Reopening of schools and offices and easing of mobility restrictions to support recovery in buses and 3W sales," said Sharekhan.  

Any further scale up in Semiconductor chips shortage and geopolitical situation can pose key risks to Sharekhan forecasts.  

Bajaj Auto, Hero MotoCorp, Tata Motors, M&M, and Maruti Suzuki were top auto stock picks of the brokerage from Original Equipment Manufacturers (OEMs) space.