Automobile stocks have tanked amid the current crisis but bounced back on what basis?
The automobile industry is huge, it’s the biggest contributor to India’s GDP and there are a ton of publicly listed companies trading on the Indian stock markets (right from OEMs to ancillaries). Thus, there are plenty of automobile stocks worth looking at, some like Eicher Motors (the parent company of Royal Enfield) have performed so well in the past decade that if you had bought Eicher shares instead of its motorcycles in the early 2000s, you would be a crorepati now!
However, Eicher stock last traded at Rs. 14,765/- per share (such heavy-weights don’t interest me), MRF (Rs. 61,543/- per share – that’s a crazy stock price, no?), Bajaj Auto (Rs. 2378/- per share – Rajiv Bajaj loves EBIDTA), Hero MotoCorp (Rs. 1837/- per share) and there are a lot of fundamentally strong companies making batteries, tyres and other parts for two and four wheelers. But there are three companies which I particularly follow because I see huge potential in them.
One is of course the heavy-weight of the Indian car industry, Maruti Suzuki. It last traded at Rs. 5507/- and was at a point close to Rs. 10,000/- per share with reports claiming it’s on its way to double as the Swift maker had set an ambitious target to sell 2 million cars a year in the domestic market.
The other is TVS Motor which last traded at Rs. 301/- and has gone 10x after the announcement of the BMW collaboration happened some 5 years ago (it was trading around Rs 30/- back then). Then there is Tata Motors (Rs. 76.85/-) which has just been falling (it was trading at Rs. 351/- on 2nd May 2018) amidst gloom surrounding JLR’s future on the back of a massive sales decline in the world’s largest automobile market, the same place responsible for all of us being in a lockdown currently but that’s a story for an entire different day.
Which brings me to the title of this editorial, should you invest in automobile stocks? The stock market is a risky place but somehow the fundamentals seem to be flawed. The national lockdown was announced on the 24th of March which means no sales or production happened post that! However, the aforementioned stocks have hit their 52-week lows of Rs. 4001/- (Maruti on 3rd April), Rs. 240/- (TVS on 7th April) and Rs. 63.50/- (Tata Motors on 23rd March) but have gone to recover by 18-35% on the basis of what? Absolutely no logical reasoning (optimism shouldn’t upswing a stock by such percentage) besides the technical indicators are also bearish. Clearly, retail investors become the guinea pig of illogical stock movement.
We at MotorBeam highly recommend people investing in any kind of stocks to do a thorough research before investing. Also, patience is critical in the stock market and during these times, remember ‘A bird in the hand is worth two in the bush’.
* all stock prices listed here are on the BSE (Asia’s oldest stock exchange).