Auto Stocks Outlook
Seen in thin range next wk; Sept earnings to lend cues
This story was originally published at 20:01 IST on 18 October 2024
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MUMBAI – Shares of auto companies are likely to remain confined to a thin range next week, while Jul-Sept earnings of companies will lend further cues, analysts said. The auto stocks saw some sell-off in the week gone by with Bajaj Auto losing the most after the company's management said sales during the festival season--Onam to Diwali--are likely to be weaker than expected.
This week, the Nifty Auto index settled 4.9% lower at 25146.90 points. Of the 15 constituents of the Nifty Auto index, 13 declined over the past week and the rest gained marginally. While stocks of Bajaj Auto and Exide Industries lost the most, those of Apollo Tyres and Eicher Motors were the only ones to have gained on a week-on-week basis. Compared to the auto index, the benchmark Nifty 50 and Sensex declined by 0.4% and 0.2%, respectively.
"On Thursday, Nifty Auto broke below the crucial 89 DEMA (double exponential moving average), marking the first downside breach of this average in the past year, indicating potential short-term pressure in the sector," said Rajesh Bhosale, technical analyst at Angel One. "The two-wheeler segment, in particular, saw a sharp decline following weak commentary from Bajaj Auto's management. On the other hand, stocks of four-wheeler manufacturers held key support levels on Friday."
"Auto stocks have seen a significant run-up in the past few months. A lot of long positions were built in the sector before the earnings. This is just the unwinding of those positions which is leading to the correction," said Ruchit Jain, lead research analyst at 5paisa.
Jain expects some consolidation in shares of auto companies in the near-term, but the long-term trend remains positive for the space. "We do not expect any significant moves on either side, there would be stock-specific moves depending on earnings announcements. However, on the sectoral front we expect some consolidation to happen in the near-term," he said.
Going ahead, earnings announcements and broader market sentiment will be key drivers for the auto sector. The stocks could see a strong rebound from their current levels if the broader market performs well, according to analysts.
Next week, the immediate support for the auto index is seen at 24400 points and resistance at 25579.80 points. Further, TVS Motor Co, Sona BLW Precision Forgings, and CIE Automotive India will be in focus as they are scheduled to announce next week their earnings for Jul-Sept.
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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
|---|---|---|---|---|
| Ashok Leyland | 223.28 | (-)2.00 | 227.80 | 215.60 |
| Bajaj Auto | 10063.95 | (-)15.30 | 10326.10 | 9710.10 |
| Eicher Motors | 4765.65 | 0.80 | 4913.70 | 4538.00 |
| Hero MotoCorp | 5216.20 | (-)4.80 | 5359.60 | 5074.40 |
| Mahindra & Mahindra | 2964.25 | (-)5.40 | 3030.10 | 2881.80 |
| Maruti Suzuki India | 12105.10 | (-)5.30 | 12327.10 | 11733.50 |
| Tata Motors | 910.15 | (-)2.20 | 935.80 | 874.00 |
| TVS Motor Co | 2715.90 | (-)2.80 | 2809.60 | 2604.20 |
| Nifty Auto | 25146.90 | (-)4.90 | 25579.80 | 24482.90 |
| Nifty 50 | 24854.05 | (-)0.40 | 25087.90 | 24450.80 |
| S&P BSE Sensex | 81224.75 | (-)0.20 | 81990.30 | 80026.50 |
End
Reported by Darshan Nakhwa
Edited by Deepshikha Bhardwaj
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