Auto Sector- The Star on Dalal Street Today

Author: Bappaditta Jana

Even though, the Auto sector had been hit by the ban of Diesel Vehicles in Delhi-NCR region and sustained a loss of almost Rs. 4,000 crores in 8 months following the ban, nothing stopped the Sector from dominating the Street. After the robust growth of 25% in April, the sales skidded by 7% in July, but still ‘Where there is a way, there is Auto sector’. Past month, Nifty Auto gave a return of 4.17%. The stocks of Automobile and Auto component companies have gained enormously, recently. As the Crude oil price continued to fall, the demand for passenger cars, two-wheelers and auto ancillaries were anticipated to go up. Apart from that, the Auto Sector has also benefited from the mighty GST bill and low inflation. There are a few favorite picks in the sector screaming ‘buy me’ loudly because of Strong Fundamentals.

There are some stocks that take pride in their low PE ratio:

  1. The first prize goes to the world class manufacturer of Auto parts- JBM Auto. The company has a PE of 11, lowest among the top ten movers of the sector.
  2. Steel Strips Wheels Limited stands second with the PE of 12.
  3. Sterling Tools is the company that holds the third rank with the PE of 13.

The rise in the Earnings per share plays a major role in the trading race. The higher the rise in EPS, the more sweeter the share becomes for Investment.

  1. For now, Escorts hold the esteemed place of the most favorite stock of the Street in the sector. Escorts have reported 185.5% rise in its EPS.
  2. Rico Auto is the next in the queue with the EPS return rising by 117%.
  3. Not so far away is JBM Auto, betting on the 20% topline growth in FY17 with the EPS rise of 111.6%

Mutual Fund holdings influence the performance of the stock a great deal in the long run. So, when an investor is focusing on buying a stock that would enrich the portfolio, MFs holding of a stock should be kept and eye on.

  1. Sundram Fasteners have shown a great number as its Mutual Fund Holding. The stock has the highest, 32, MFs holding among the top ten gainers in the Automobile and Auto Components sector.
  2. Igarashi Motors follows behind with 17 MFs holdings in its account.
  3. Escorts grab a place here as well with 15 MFs holdings.

Brexit has not left any Sector untouched but count on the ones that have shown positive movement after the historical event.

Here, Sundram Fasteners shares the center stage with JBM Auto, both showing 73% gains in their share price post-Brexit.With 65% gains, Rico Auto tags along, bagging the second place.And Of course, Escorts showing 58% gains post-Brexit.

Apart from these rulers of the Auto Sector, the portfolio can also be enriched with Federal-Moghul Goetze Limited, BancoIndia, Pricol and Sterling Tools Limited. These stocks also hold potential for attractive returns in the Sector.

To Conclude, all potential Traders must have at least one stock from the Auto Sector in their Portfolio lest they miss out on a golden opportunity.