Auto stocks defy sales blues, snags in supply chains

India's auto and auto ancillary stocks are on a tear—even as sales sputter and supply chain clouds gather.

- Dipti Sharma

Some lesser-known auto component makers have posted triple-digit stock market gains in the past three months, eclipsing marquee vehicle manufacturers and defying a cautious outlook for the industry.

Shares of Frontier Springs have soared 151% in the past three months, Lumax Auto Technologies is up 110%, and Kinetic Engineering has gained 90%, outpacing commercial vehicle makers Force Motors's 85% and SML Isuzu's 78% gains.

Ample liquidity and improved risk appetite have lifted not just autos, but other sectors as well. Hopes of a festive season demand rebound, coupled with a potential trickle-down from banks following the Reserve Bank of India's 50-basis-point rate cut, have added to the optimism.

Still, it hasn't been a smooth ride for all auto and auto ancillary stocks.

Containe Technologies (-28%), Ola Electric (-23%), Atul Auto (-9%), GNA Axles (-11%), and JBM Auto (-9%) have seen corrections over the past three months, while the Nifty Auto index has risen 7.2%.

Hyundai Motor India fared better with 26% gains in the past three months, followed by Mahindra and Mahindra (17%), TVS Motor Co. (4%), Bajaj Auto (2%), and Maruti Suzuki India (6%).

Some market participants caution that if the expected rate cut transmission to borrowers or retail loan growth fails to play out, auto stocks could be in for a sharp pullback.