What are the top sectors to bet on now? Nuvama Institutional Equities has trained its focus on the automotive sector and picked 5 key stocks ranging from OEMs to component makers. Their top Buys include Mahindra & Mahindra, TVS Motors, Motherson Wiring, Uno Minda and Apollo Tyres. There are various factors supporting their investment radar.
The brokerage house estimates tractors, SUVs, and two-wheelers to clock high single-digit growth over FY25-27. These categories could outperform commercial vehicles (CV) growth.
According to Nuvama, the two-wheeler and tractor sales shall be supported by the rural and marriage season demand. This will result in high single-digit growth YoY. In comparison, Nuvama expects that CV and passenger vehicle (PV) growth shall be muted, with a marginal decrease.
PV demand has been hurt by muted sentiments, indicated by lower enquiries and delays in conversion.
Nuvama on automobile industry: TVS, Eicher Motors to outperform
Nuvama expects TVS and Eicher Motors-Royal Enfield shall outpace peers in two-wheelers, while M&M shall outperform among tractors and PVs.
Nuvama on automobile sector: two-wheeler segment
The two-wheeler industry volumes are expected to grow by 7% YoY in the domestic market, which Nuvama thinks is on the back of positive rural customer sentiments and marriage season demand.
Not just domestic markets, the brokerage expects exports shall increase in double digits due to growth in the Latin America and Africa regions.
“We estimate total volume growth shall be 23% YoY for TVS (to 410,000 units), 15% for EIM-RE (to 84,000 units), 9% for Hero MotoCorp (to 550,000 units) and 9% for Bajaj Auto (at 390,000 units),” said Nuvama.
Nuvama on automobile sector: Good monsoon indicates positive farmer sentiments
The tractor industry volumes are expected to grow by 7% YoY in the domestic market due to positive customer sentiment and a favourable base. On the brighter side, farmer sentiment is positive in anticipation of a good monsoon. “We forecast total volumes of M&M Farm/Escorts (including Kubota) shall grow 7%/2% YoY to 50,800/11,500 units,” said Nuvama.