Auto stocks have emerged as winners in an otherwise weak market of late. Against a 3.13 per cent drop in the BSE Sensex in the last one year, select auto stocks such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra (M&M) have soared up to 53 per cent in the last one year. Data showed shares of four-wheeler maker Maruti Suzuki gained 20.93 per cent in the past one year. Shares of JLR-owner Tata Motors climbed 19.65 per cent in the one-year-period. M&M, in fact delivered 53.63 per cent return during the period.
Brokerage Prabhudas Lilladher likes M&M due to its back-to-back successful launches in the highly competitive SUV space, its leadership position in tractor industry, its proactiveness to leverage the EV trend and its well-played out capital allocation strategy. Since the launch of Scorpio-N on June 27, the auto stock has rallied 15.41 per cent.
For Maruti Suzuki, however, the launch of latest version of Vitara Brezza on June 30 has not lifted the stock much. Maruti stock, which stands at Rs 8,550 apiece, has gained 0.50 per cent since the launch.
Meanwhile, Tata Motors stock has fallen 17 per cent this year amid weak global markets, Russia-Ukraine war and prospects of UK entering into a recession.
JLR contributes about 67 per cent of Tata Motors' revenues.
In September, sales of personal vehicles, and commercial vehicles were inline, while tractors were above estimates, Motilal Oswal said in a report.
Commenting on the outlook for near-term sales, the financial services firm said: "In personal vehicles space, sales of Maruti Suzuki and Tata Motors grew 104 per cent and 85 per cent YoY," it noted.
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Here's a look at what analysts said on the outlook of the three stocks and which one among them is the better long-term bet.
Pranit Arora, co founder & CEO, Univest prefers M&M among the three auto majors, due to recent launches.
"Among the three, undoubtedly M&M is the most preferred choice at the moment. It has seen a stupendous response to its recent launches, particularly the new Scorpio-N. It also plans to introduce EVs soon. Tata Motors may have taken the lead in EVs, but the burden of JLR continues to weigh it down despite leadership in four-wheeler EVs. Maruti Suzuki, though has the highest market share, is slowly losing it to other players. Also the demand has shifted from compact cars, which was Maruti Suzuki's strength," he said.
Arora said M&M can be expected to reach levels of Rs 1,500 in the coming few months.
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Abhijeet from Tips2trade said Maruti & M&M are much better placed as long-term bets with targets of Rs 9,930 and Rs 1,500 look likely on a daily close above Rs 9,418 and Rs 1,338 levels.
"From a short-term perspective, despite being loss making and heavily in debt, Tata Motors could recover smartly from current levels for targets of Rs 431- Rs 446 in the near term," he said.
Ravi Singhal, CEO at GCL is also bullish on M&M among the three stocks.
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"Maruti is India's largest market share and has been concentrating on commercial and exports. Because the yen has risen, higher royalties have an impact. Heavy commercial vehicles have the largest market share for Tata Motors. JLR has a global presence. There are fears of a European recession. It has a first mover advantage in India for electric vehicles. Both passenger and commercial sectors are performing admirably, but there is still room for improvement," Singhal said.
Singhal said tractor and light commercial vehicles along with SUVs have the largest market share for M&M now. The company is focusing on electric vehicles, he said adding that it is also doing well on the two-wheeler front. Singhal said M&M has the best portfolio mix.
Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking is in favour of M&M stock due to its recent upmove after the launch of Scorpio-N.
"The Indian automobile industry expects the demand sentiment to remain positive and hopes that the momentum will continue amid the long festive season and the adequate rainfall across the country. Within that space, the three stocks Maruti, Tata Motors, M&M are attractively priced after the recent cool-off in prices following negative global sentiments. Among the three, M&M seems the strongest technically, with its consecutive higher high formation, scaling all-time highs amid present uncertain times. On the contrary Maruti and Tata Motors have not been able to scale their respective all time highs of 2018 and 201, respectively. On the oscillator front in the weekly time frame, the 14-period relative strenghth index (RSI) in both Maruti and Tata Motors has witness Class B bearish divergence where prices makes a double top, with an oscillator tracing a lower second top. However, M&M remains on a secular uptrend and prices are in sync with the RSI, presently trading in neutral price reading of 64 indicating room for further upside, " Das said.
"All the three stocks are edging higher trailing an upward rising channel formation. In case of Maruti, the upper band of the channel is crafting resistance for the stock around Rs 9,415, while for Tata Motors, the lower panel of the channel is breached around Rs 450 in the recent market mayhem. However, in case of M&M, a strong uptrend remains unabated as the stock has provided the necessary breakout from the said pattern indicating that the stock is out of joint and off the clutter. The volume trend has shown an accumulation in M&M for the past few months thus indicating an increased enthusiasm to push prices higher while the rest lacks volume participation. Hence, it can be expected that M&M can witness a strong up move and head towards Rs 1,425- Rs 1,450 in medium-to-long term perspective (measuring implication of the bullish upward sloping channel)," he added.
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