Tata Motors, Maruti, Bajaj Auto, TVS, Eicher Shares Fall 2-5%; Why Auto Stocks Are Down On October 3?

All auto shares have nosedive on Thursday, October 3, 2024. From large-caps like Tata Motors, and Maruti Suzuki to mid-cap and small-caps Motherson, and Exide Industries, auto stocks are taking massive beatings from bears. BSE Auto index nosedived by as much as 1,436.6 points so far in the trade.

BSE Auto index touched an intraday low of 59,798.74 in the opening bell of October 3, 2024. The index dived by 1,436.6 points or 2.34% at least. Currently, the index is trading at 60,155.49 down by 1.76% or 1,079.85 points.

All stocks listed on the BSE Auto index were in a bloodbath. Apollo Tyre shares were down by 4.25%, followed by Eicher Motors stock which dipped by 4.16%.

However, sharp-selling heavyweights like Tata Motors, Maruti Suzuki, Bajaj Auto, Hero MotoCorp and M&M dragged the index the most. These stocks are down by 2-3%.

Other stocks like TVS Motors, Balkrishna Industries, Exide Industries, Cummins India, and Samvardhan Motherson have also dipped steeply by over 1-2%.

Why Auto Stocks Are Down On October 3?

The latest performance in auto stocks comes after their September 2024 month's sales announcement. Despite overall auto sales of the sector trending positive, Motilal Oswal pointed out that the start of the festive season for automobile companies has been weaker.

In its latest report on October 3, Motilal highlighted that in two-wheelers, BJAUT/TVSL/HMCL/RE wholesales exceeded expectations as OEMs anticipate a strong festival season starting Oct'24.

Motilal's note said, "While all the 2W OEMs have pushed stock with dealers in anticipation of a demand revival in festive, it has to be highlighted that the festive start has been much weaker than expected and one needs to monitor the festive momentum closely."

Further, in the case of passenger vehicles, as per the brokerage, MSIL's dispatches met expectations, while MM's dispatches exceeded them, and those of TTMT fell short. In CVs, both TTMT/AL wholesales fell short of estimates, while VECV wholesales surprised. TTMT management highlighted that the demand for CVs is expected to pick up from 3QFY25, led by ILCVs and buses, followed by MHCVs. In tractors, MM sales were in line, while ESC was surprised.

Meanwhile, in the case of commercial vehicles, Motilal pointed out that the resilient demand in the passenger commercial vehicles business led to a 3% increase in Q2FY25 over Q2FY24.

The brokerage believes that with the easing of rains, increased infrastructure spending, and the onset of the festive season boosting consumption, demand is expected to gradually pick up in Q3FY25, led by ILMCV and buses and followed by M&HCV and SCVPU.

Moreover, Motilal on the tractors segment said that the rural sentiment remains positive on account of good kharif crops and the potential for strong rabi crops. With positive terms of trade for farmers and upcoming festivals, robust demand is expected for tractors going forward.

Which Stocks Are Attractive?

Motilal said, "While we expect the 2W segment to continue to outperform other segments in FY25, this seems to be fully priced-in after the recent strong rally in 2W stocks. MSIL is our top pick among auto OEMs as it continues to be a play on rural recovery with attractive valuation. We also like MM, given healthy demand momentum in both SUVs and tractors for FY25."

Along the similar lines, Sagar Shetty, Research Analyst, StoxBox said, despite concerns over lower rural demand during the Shradh period, the 2W segment maintained its double-digit growth trajectory. Tractors recorded positive growth despite last year's high base, thanks to adequate rainfall in key regions and increased sowing of kharif crops. Looking ahead, the industry anticipates a positive uptick, with dealers continuing to build up inventory and expecting robust retail demand driven by the major festivities in October.