Better days seen for auto in H2

Mumbai: Auto stocks are buzzing and are on a path of recovery after the huge price fall, as brokerages and analysts see a pick-up in automobile sales in the second half of the financial year on the back festive season demand and good monsoon rains.

September sales showed a reversal of trend with month-on-month (MoM) sales picking up over August.

Top seller Maruti’s MoM sales were higher by 15.24 per cent in September at 1,22,640 units, though the year-on-year (YoY) sales for were down 24.84 per cent.

ICICI Securities, in a report, said, “September 2019 OEM dispatch volumes showed a stark contrast between YoY and MoM trends. While last year’s high base, elevated inventory levels (two wheeler & commercial vehicle) and meek demand all continued to haunt yearly prints, a sequential improvement was seen across segments particularly robust on the passenger vehicle side.”

“Strong monsoons played a part in healthy tractor volumes. Initial industry commentary suggests the festive season has got off to a decent start. With the bulk of the season yet to play out in October, next month’s data assumes significance,” ICICI Securities said.

“The first phase of festive season however lacked the spark. We need to wait and watch whether amidst lots of discounts and a wide array of marketing gimmicks give some cheer to the auto sector. Tractor demand saw a good recovery post a strong monsoon 2019. Going forward, in the short term, festive season will be the main factor to look at.  A good monsoon, encouraging festive season, low base of last year’s second half (H2) may lift up the sector,” said Ashwin Patil, Senior Research Analyst at LKP Securities.

Tractor sales are poised for growth with festive season and good monsoon, said analysts.

“Better than expected monsoon, better reservoir levels and expectation of increase in crop prices have given some relief to tractor volumes, which ended on a flat note in September 2019,” said Sneha Prashant, Analyst — Auto, Centrum Institutional Research.

“Our channel checks suggest that dealers are sitting on low inventory and expect good pick up in second half (H2) of  the current financial year, said Prashant.