Best auto stocks to buy in India
Automobile stocks are highly favoured by several investors in India who put their faith in the consistent performance and continued growth of the country’s automobile sector. The Indian auto industry is the 4th biggest worldwide with annual turnover touching in excess of $100 billion and employs 32 million people approximately as per reports. Making steady investments in the sector may yield rich returns over a sustained time period if you are already familiar with the best auto stocks to buy in India. In spite of temporary market fluctuations, the auto sector is one of a kind where consumer demand always revives and grows over a period of time. The industry has also drawn sizable FDI (Foreign Direct Investment) inflows of a whopping US $23.89 billion between April 2000 and December 2019 as per statistics released by the DPIIT (Department for Promotion of Industry and Internal Trade).
Take a few aspects into consideration when you are compiling a list of auto sector stocks to invest in. Check for a widespread geographical market presence along with a highly diversified base of customers. Check out the segments being catered to in the market along with overall prospects for future growth. Check the valuation of the company, track record of the management and overall performance of the stock in bear and bull markets alike. There are multiple publicly listed companies that are traded across stock markets in India.
Here’s taking a look at some of the best auto stocks that you can buy in India:
- Eicher Motors– Eicher Motors Limited is one of the most reputed auto industry players in India, manufacturing three and four wheelers, majorly in the commercial (CV) segment. Based in New Delhi, the company was founded in 1982 and had a market capitalization of Rs. 38,530 crore as of end-2019. The company was able to generate sizable net cash with overall net cash flow improving rapidly over the last few years. Book value per share and annual net profits increased in this duration as well while the company also has zero promoter pledge.
- Tata- Tata Motors is one of the top automotive stocks that you can purchase in India. Founded in 1945 with its headquarters in Mumbai, Tata Motors has evolved considerably over the last few years, having grown net profits, profit margins and quarterly revenues along with profits on a quarterly basis. Net cash has been generated by the company while its shares have lower PE (price to earnings) ratios.
- Maruti Suzuki– You can consider investing in Maruti Suzuki shares since the company is the foremost player in the Indian PV (passenger vehicle) space with dominant market share as well. Maruti Suzuki India Limited (MSIL) is a subsidiary of Suzuki Motor Corporation from Japan. Maruti Suzuki has considerably lower debt along with being able to consistently churn out net cash and cash flows over the last 2-3 years. Its book value (per share) has been comparatively improved in this duration while it has zero promoter pledge as well.
- Honda Motor Company Limited– Honda Motor Company Limited is the subsidiary of Japanese automotive giant Honda and was founded in the year 1948. Honda is one of the biggest motorcycle and car manufacturers worldwide and the company is known for its core competence in terms of manufacturing engines and its highly diversified portfolio of products. Honda has immense brand awareness in the entire region and has performed decently over the last few years as well.
Experts state that as of the end of June, 2020, the Nifty Auto Index had rallied by a whopping 42% ever since the 23rd of March, 2020, when the nationwide lockdown was declared. This is a good figure in comparison to the S&P BSE Sensex rise of 36.35%. The Nifty Auto Index also posted daily gains of 1.12% on the 30th of June, 2020, driven by gains in companies like Maruti Suzuki (2.67%), Bosch (4.6%), Eicher Motors (1.89%) and Hero MotoCorp (1.8%). PV dispatches are expected to grow considerably over the next few months although they will be lower on a year on year basis overall.
Industry experts forecast marginal recovery for automobile companies, driven by a good monsoon and reviving income in rural markets this year. Auto stocks are thus regarded as the best stocks to buy in India for long term, considering the handsome possibilities of growth in the future. Normalization of demand should take place by the festive season when sales volumes are expected to pick up greatly. Good picks in the large cap category include Eicher Motors and Mahindra and Mahindra while Motherson Sumi Systems could be a good pick in the midcap segment. Maruti Suzuki is also in a much improved position than its rivals owing to its sizable and strong entry-level car portfolio. Maruti Suzuki should benefit considerably in the future years since the ongoing pandemic has spurred demand for entry-level cars amongst first-time buyers or those looking for a second car at a reasonable price for commuting purposes as per experts.
Maruti Suzuki will leverage its existing portfolio greatly while Tata Motors should also benefit in this regard. Mahindra and Mahindra may see steady recovery in its tractor category while favorable responses to the upcoming new-generation models of the Scorpio and XUV500 may tilt the markets in the company’s favor. Tata Motors will be betting on its upcoming Gravitas and its sizable CV portfolio along with the Altroz and Nexon EV to drive volumes and market growth alike.