Auto Stocks Surge Following India’s Impressive GDP Growth: Insights from Tata Motors, M&M, and Bajaj Auto
Today’s Stock Market: Following the announcement of India’s impressive gross domestic product (GDP) for the third quarter of the current fiscal year, auto stocks in India are experiencing robust demand since the early morning trades on Friday. Tata Motors shares have surged by over 2 per cent, Mahindra & Mahindra (M&M) shares have seen an increase of around one per cent, Bajaj Auto’s share price has risen by 2 per cent, Hero MotoCorp shares have gained approximately 1.50 per cent, while Maruti Suzuki and Ashok Leyland shares have each risen by nearly one per cent in early morning trades on Friday.
As per insights from stock market analysts, auto stocks are currently experiencing an upward trend, attributed to India’s Q3FY24 real GDP growth of 8.4 percent, surpassing expectations. They emphasized that India’s GDP has consistently provided positive indications, reflecting a robust national economy. These experts highlighted that a strong economy fosters enhanced purchasing power, benefiting sectors like auto, banking, and real estate. Regarding their optimism towards the auto, realty, and banking sectors within the thriving Indian economy, they pointed out that increased income levels typically result in heightened expenditure on residential properties, cars, and motorcycles. For investors seeking opportunities in auto stocks today, they recommended long-term investments in shares of M&M, Tata Motors, Maruti Suzuki India, Bajaj Auto, and Hero MotoCorp.
GDP of India in focus
Discussing India’s GDP data for Q3FY24, Nikhil Gupta, Chief Economist at Motilal Oswal, highlighted key insights, stating, “India’s real GDP expanded by 8.4% YoY in 3QFY24, a pleasant surprise compared to the market (and our) forecast of 6.5-7%. Additionally, the growth for the last two quarters was revised upward to 8.1% (from 7.7% previously). FY22 growth was also revised upward to 9.7% (from 9.1%), while FY23 was revised downward to 7% (from 7.2%). Notably, the unexpectedly robust growth of 32% YoY in net taxes contributed to the 8%+ GDP growth, despite real GVA growth standing at 6.5% for the quarter. Detailed analysis indicates that the decline in the agricultural sector was fully offset by double-digit growth in the industrial sector and robust performance in services.”
Commenting on the surge in auto stocks today, Avinash Gorakshkar, Head of Research at Profitmart Securities, remarked, “In a robust economy, the spending capacity of individuals increases, particularly with higher incomes, leading to expenditures on homes and vehicles. With both a vehicle and a house, individuals tend to upgrade when their spending capacity rises.”
Nifty 50 vs GDP of India
Sandeep Pandey, Founder of Basav Capital, explained, “There’s a widely recognized market principle suggesting that the Nifty 50 index tends to expand two to two and a half times the annual growth rate of India’s GDP. Hence, with India’s GDP maintaining a steady growth of 8 percent over the last three quarters, this momentum is expected to reflect positively in the stock market. According to this principle, one can anticipate the 50-stock index to potentially increase by approximately 16 to 20 percent in FY24. This growth is projected to be driven by alpha returns in the auto, banking, and real estate sectors, which are likely to attract a significant portion of investment in the upcoming trading sessions.”
Auto stocks to buy
Regarding auto stocks suitable for inclusion in one’s investment portfolio, Sandeep Pandey suggested, “In the four-wheeler segment, M&M, Maruti Suzuki, and Tata Motors are anticipated to yield impressive returns over the long term. Similarly, in the two-wheeler segment, Hero MotoCorp and Bajaj Auto are poised to deliver robust performance.”
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