September auto sales preview: Early Navratri to aid volume performance, says brokerage; bets on these 4 stocks

Even though the auto sector took a hit of around three per cent in the past one month, brokerage sees robust auto sales' figures in September. In the past one month, Nifty Auto and S&P BSE Auto had declined three per cent each against nearly four per cent drop in benchmark indices—Nifty and Sensex.  

With September drawing to close amid festive season, brokerage firm believes early commencement of Navratri festival in September in comparison to October last year will boost volume performance of vehicles across different categories.  

Brokerage house Emkay was of the view that robust growth in the passenger and cargo segments should help Commercial Vehicles (CVs) maintain their uptrend.  

It said a large order book, production ramp up, and favorable base effect augur well for passenger vehicle segment. Among original equipment manufacturer (OEMs), it estimated domestic volumes to grow by 144% Year on year (YoY) for Mahindra & Mahindra (MM), 129% for Maruti Suzuki India Limited (MSIL), and 87% for Tata Motors (TTMT). The volume tally for MM and MSIL is being supported by commencement of dispatches of new products—Scorpio-N for MM and Vitara for MSIL, said Emkay.  

On discounts during festive season, it said vehicle discounts have increased on Month-on-Month (MoM) basis, but remain significantly lower than the elevated levels seen in the past.  

Meanwhile, festive demand (Navratri festival) and inventory build-up with dealers are expected work well for 2-wheelers. "Our checks indicate that urban demand is better than rural and scooters are doing well in comparison with motorcycles," underlined Emkay.  

The brokerage also sees tractors' volume picking up in September. It sees a growth of 12% YoY for Escorts Kubota (ESC) and 8% for M&M on continuing inventory build-up with dealers in runup to the festive period.  

As far as tractors are concerned, customer sentiments are slightly subdued due to uneven spread of monsoons and lower Kharif sowing acreage, it added.  

The brokerage remained bullish on the sector in general and preferred Maruti Suzuki, Mahindra & Mahindra, Escorts Kubota and Ashok Leyland from this space.