Home >Markets >Mark To Market >December auto wholesales likely in cruise mode, lend support to stocks

MUMBAI: The festival season juggernaut for the auto sector may still have some steam left. A low base because of last year’s de-stocking is likely to aid the December wholesale numbers. Little surprise, auto sector stocks were up in Thursday's trade.

Almost all segments are likely to show a decent year-on-year growth in sales. But given that it’s a slow season for commercial vehicles, dispatches in this segment could still be soft. Three-wheeler sales are likely to remain sluggish, still the low base of last year should support growth.

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"Volumes are expected to be lower month-on-month on account of season factors but most companies should still report y-o-y growth, thanks to a low base," said analysts at Jefferies India Pvt Ltd in a client note.

The key segment of passenger vehicles is where the action is expected to continue. The wholesale numbers are expected to see decent upticks year-on-year as demand recovery has been steady due to the need for personal mobility. Besides, last year’s channel de-stocking due to BS-VI transition is helping quite a bit. Also, channel inventory has been low this season due to rising demand.

But here again, sequential sales though could show a decline due to high festival season stocking in the past month. “Footfalls and new enquiries witnessed a sequential decline but were at normal levels. Discounts were substantially lower than normal level due to tight demand-supply situation and low inventory levels, which stood 1-3 weeks," said analysts at Nirmal Bang Equities Pvt Ltd in a client note.

Note that Maruti Suzuki’s Ltd’s domestic wholesale numbers are expected to show a growth of about 5-7%.

On the two-wheeler front, sales are expected to remain high, while some companies are could see double-digit growth. Some states are showing better growth say analysts, which has been largely been coming from rural areas. However, the farmers' agitation could play spoilsport.

Even so, Royal Enfield could show good double-digit growth of about 25% y-o-y. Analysts at Jefferies reckon that Hero Motocorp could show a growth of about 7% y-o-y, while Bajaj Auto Ltd and TVS Motors Ltd could see better domestic growth of 12% and 19% y-o-y, respectively. One of the positives is that scooter sales are seen to be picking up.

However, commercial vehicles are likely to remain slow. Ashok Leyland is expected to report a flat growth over last year.

Even so, the sector has been doing well. The Nifty Auto index is up 3.5% so far in December, and is over its pre-covid highs.

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