Nifty Auto touches new 52-week high as Tata Motors, M&M zoom; what is fuelling the rise?
Nifty Auto index gains over 1% and touches new 52-week high, supported by significant buying in the four-wheeler space. Mahindra & Mahindra, Ashok Leyland, Tata Motors, Maruti Suzuki, and Bharat Forge contributed positively to the index.
PremiumIn a overall upbeat market on Monday, the Nifty Auto index gained more than 1% and touched a new 52-week high. According to analysts, this upward movement is being supported by significant buying in four-wheeler space. The Nifty Auto index is anticipated to maintain this trend going forward, with prices ideally moving towards 14800 in the short term and 14300 acting as immediate support.
During the trading session today, Tata Motors Ltd and Mahindra & Mahindra Ltd recorded a new-52 week high. The Nifty Auto index ended 1.26% higher on Monday.
Mahindra & Mahindra Ltd (closed up 4.03% ), Ashok Leyland Ltd (closed up 1.98%), Tata Motors Ltd (closed up 1.93%), Maruti Suzuki Ltd (closed up 1.02%) and Bharat Forge Ltd (closed up 1.19%) were among the positive contributors of the index.
TVS Motor Company (closed down 0.83%), Sona BLW Precision Forgings Ltd (down 0.51%), Hero MotoCorp Ltd (down 0.76%) were the some of the negative contributors to the index.
"Nifty auto index has breached 55 months resistance (4.5 Years) followed by retest with base formation. It is bullish continuation sign on higher time frame. On a weekly time frame stock has given breakout of rectangle pattern.
In recent upside move, Nifty 50 is up by 10% whereas in same duration Nifty auto is up by almost 20%. Its shows relative better strength of Auto sector. Nifty auto index is on spree to form all time high level," said Kapil Shah is Technical Analyst at Emkay Global Financial Services and technical analysis trainer at Finlearn Academy.
On the fundamental side, some of the key contributors contributing to the index are the Q4 FY23 earnings season that was fairly good for the auto companies, and May's monthly numbers weren't too bad either. Therefore, analysts believe that, on a low base of FY23, two-wheelers have performed well in the first place in the domestic markets.
The numbers are encouraging, and industry predicts that the two-wheeler market would rise by about mid-single digit or slightly higher single digit in FY 24.
According to Ashwin Patil, Senior Research analyst at LKP Securities, EV2 Wheelers will experience FAME -2 subsidy withdrawal impact on demand in the short term, but it will normalise in a few months.
Further, in some parts of the country, the marriage season has been favourable for two-wheeler, also the sentiments have improved for 2 wheeler where the demand has shifted towards premium bikes. Positive impact of good monsoons is anticipated on rural demand. While the potential impact of El Nino is played down by certain companies, the analysts still are playing a wait and watch game on that front.
"Therefore, it is anticipated that the rural-focused 2 Wheeler sector will perform well. However, tractors, as you may have noticed, have had their cycles prolonged this time. Therefore, it would appear that the growth on the front of tractors may moderate this year.
As far as the PVs are concerned, the issue with the chip shortage has significantly improved resulting in pent-up demand and demand for SUVs zooming up. We have witnessed that the waiting time has also come down to a good extent for most of the vehicles. Thus brands like Maruti, Tata Motors, and M&M are expected to perform well on volume front. Recent launches and the upcoming ones shall further drive the demand. Would like to specially mention at this juncture that May was one of Maruti's strongest months in the previous 31 months, with 1.78 lakh units reported," added Patil.
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