Indian auto stocks rise as strong October sales point to steady festive demand

what happened

Shares of Indian carmakers gained on Monday. Reuters reports that October sales were strong and suggest demand held up ahead of the festive season. The Nifty Auto index rose 1.22% to 25,733.6 points by 9:24 a.m. IST.

Analysts favour two-wheeler and commercial vehicle makers, since they can more easily pass rising input costs on to customers. Maruti Suzuki shares climbed 2.58% to 11,691 rupees, and the company posted a record monthly total of 276,120 vehicles, up 25%. TVS Motor's October sales rose 29%, while Tata Motors' commercial vehicle sales increased 27%. Tractors were the weak spot, with Mahindra & Mahindra's total sales down 12%, a decline the company mainly attributes to the shift in festive dates.

Emkay Global said Diwali moving from October last year to November this year distorted year-on-year comparisons and masked healthy underlying demand. Analysts say the bigger test will come after the festivals, when rising input costs and supply constraints could weigh on growth.

why it matters

For markets, the figures suggest Indian vehicle demand is holding up against a high base from last year's tax-cut-driven surge. The sector remains sensitive to commodity and material costs, which weigh most on passenger-vehicle makers.

market impact

Indian automakers: strong sales support the sector, while rising input costs pressure passenger vehicles

• ▲Nifty Auto pressure up — strong October sales support expectations for demand
• ↔Maruti Suzuki mixed — record sales offset by rising commodity costs

tags

instruments