The Nifty Auto index was down 0.5% on Monday. (Photo: Mint)
The Nifty Auto index was down 0.5% on Monday. (Photo: Mint)

Sluggish vehicle sales may delay any recovery in auto stocks

  • The decline in sales at India's largest carmaker Maruti Suzuki Ltd capped a pickup in the stock price seen in the past few months
  • Domestic sales in November declined 1.9% year-on-year and 1.6% month-on-month

Auto sales remain in the slow lane in November, denting investor sentiment. Going by the sales figures, it seems even a gradual uptick in the sector remained elusive as the mild uptick in the festival season failed to roll over to November. The Nifty Auto index was down 0.5% on Monday.

The decline in sales at India's largest carmaker Maruti Suzuki Ltd capped a pickup in the stock price seen in the past few months. Domestic sales in November declined 1.9% year-on-year and 1.6% month-on-month, indicating that the auto market is far from revival. This will continue to put pressure on the stock.

Mahindra and Mahindra Ltd’s total sales slumped about 9% last month. In the domestic market, its sales dropped about 7%. A weaker global economy hit exports, which slumped 26% year-on-year. Tractor sales were also muted and showed that the stress in the rural economy is far from over.

Tata Motors once again failed to make much headway in the domestic market as sales slumped 25% in November. Financing issues hit sales in the passenger vehicles segment while sales of medium and heavy commercial vehicles were the worst hit, falling tanked 38% year-on-year. As commercial vehicles sales depend on economic growth, most forecasts pointing towards a further slowdown does not bode well for the sector.

Auto stocks have remained largely flat because they have shed substantial value this year. That does not mean the stocks are inexpensive. In fact, the current slump shows that the recovery will be more prolonged than what was estimated earlier.

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