Will Automotive Stocks Change From Slow Lane To Fast Lane?

Automotive stocks have had a special emotional value for those investors who have been investing in the markets for more than two decades. The likes of Bajaj Auto, Ashok Leyland, Hero Motors, Eicher Motors and Tata Motors have created humongous wealth for its shareholders. However, the industry has gone through a rough patch over the past few years. The silver lining is that there is the likelihood of electric vehicles changing the fortunes of the industry. Yogesh Supekar explains why a fresh and open-minded view on automotive stocks is required at this point of time

- Yogesh Supekar

The truth is there for all to see – automotive stocks have taken a beating and have not participated in the current market rally. Several investors who are holding on to their automotive stocks in the portfolio with higher weights assigned to the sector stocks are clearly complaining. Says Rahul Gaikwad who has been holding automotive stocks in his portfolio for over a decade, “I have Bajaj Auto as my top portfolio holding and near about 10 per cent of my portfolio is Tata Motors. I bought Bajaj Auto in 2010 at around ₹830 per share. The shares of Bajaj Auto have gained by 364 per cent since January 2010 while the BSE Sensex has jumped higher by 235 per cent in a similar period.”

“I am happy Bajaj Auto has outperformed the Sensex over my holding period and I have enjoyed the dividends as well. This year I got ₹140 per share as dividend. The dividend yield on my buying price comes to about 17 per cent. I am happy with this kind of return. On the flip side, both Bajaj Auto and Tata Motors have, over the past five years, underperformed heavily. Bajaj Auto has gained by 33.21 per cent while Tata Motors has delivered negative 41 per cent when the Sensex has gained by 109 per cent. I do not know if all the automotive stocks have displayed a similar performance but my portfolio has underperformed heavily in the past five years due to higher allocation to these two underperforming automotive stocks,’ he adds.