Auto Ancillary Accelerating Ahead in Top Gear

Amidst a scorching June heat wave that has impacted automotive sales, automotive and ancillary stocks are soaring to new heights, bolstered by strong performances from the companies. Diverse perspectives on government initiatives and budgetary expectations, coupled with anticipation surrounding major IPOs, are shaping a dynamic landscape in the industry. What exactly is unfolding in the automotive industry? Mandar Wagh delves into the factors driving optimism within the industry and offers forecasts for its future trajectory

- Mandar Wagh

During a robust and uninterrupted uptrend, the Indian benchmark indices BSE Sensex and Nifty 50 consistently reached new record highs on the bourses. Numerous sectors reaped substantial benefits, with the Indian automobile and ancillary industry emerging as one of the best performers. The BSE Auto index, the sectoral gauge, significantly outpaced the main indices, delivering impressive returns of 37 per cent year-to-date and 67 per cent over the past year.

Furthermore, the industry shielded investors' wealth during a market bloodbath amidst heightened volatility and uncertainties surrounding the Lok Sabha election results, surging over 8 per cent in the week of the results. Despite a scorching June heat wave impacting automotive sales, its effect on the price movement of automotive and ancillary stocks was relatively minimal. Let's explore the factors contributing to this optimism within the industry and understand its future potential outlook.

About the Industry

The Indian automobile and ancillary industry includes automobile manufacturers of passenger vehicles, conmercial vehicles, two-wheelers and three-wheselers. It also involves the production of automotive components such as engine parts, transmission systems, suspensions, electrical parts and tyres.

Additionally, the industry covers fuel systems, lubricants, automotive electronics and aftermarket services. Research and development, logistics, supply chain management and dealerships for new and used vehicles are integral parts too. The industry serves as a steadfast barometer of the country's economic vitality, pivotal in driving macroeconomic growth and technological advancement.