Tata Motors shares jump 15%, auto ancillaries to pick up post lockdown; Nifty Auto surges nearly 6%

Automobile companies shares rallied on Thursday with Tata Motors as the top gainer on the Nifty 50 index. Tata Motors share price gained as much as 14.77 per cent to Rs 89.70 apiece on NSE. Among 11 sectoral indices, the Nifty Auto index was top gainer, up 5.76 per cent led by gains in Tata Motors, Bharat Forge and Motherson Sumi Systems, all up in the range of 10-14 per cent. Tata Motors surged after the reports said that Jaguar Land Rover had restored 75 per cent of its budgeted production in China. “Chery Jaguar Land Rover Automotive Co Ltd or CJLR’s manufacturing plant in Changshu has restored its production capacity to 75 per cent of pre-covid-19 levels,” according to a report in Livemint.

Along with automobile companies, tyre stocks also gained in the trade. Apollo Tyres share price gained 8 per cent, JK Tyre & Industries shares jumped nearly 7 per cent, Exide Industries shares jumped 5 per cent, while the shares of MRF rose over 4 per cent. However, post lockdown, marginal growth is expected in the batteries segment, “driven by an upsurge in aftermarket demand stemming from the replacement of old and discharged batteries post the removal of lockdowns,” Emkay Global Financial Services said in a report.

Nifty Auto index has corrected by about 19 per cent since March 1, 2020 amid the coronavirus outbreak and nationwide lockdown. “Most automotive stocks have corrected sharply and are currently trading at 20%-40% below their historical long-term average multiples,” research and brokerage firm ShareKhan said in its latest report.

As per SIAM’s estimate, the Indian auto industry is losing Rs 2,300 crore in production turnover for every day of closure. Moreover, if India’s GDP growth for FY21 falls below 1%, PV sales will likely decline by 20-24%, with the overall auto industry likely to decline by over 20% in FY21, according to SIAM estimates. “We expect minimal to nil wholesales by Auto Original Equipment Manufacturers (OEMs) in the month of April’20 on the back of nationwide lockdown. Some OEMs have received permission from the local authorities to resume operation albeit on a lower scale, with safeguards and 25-30% of the workforce,” Nirmal Bang Institutional Equities said in the Automobiles sector update.

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