The BSE Auto Index gained the most in the sector on Monday, rising 1.9% to close at 25,355.47. The gains of the auto index were led by Ashok Leyland,
And Mahindra & Mahindra which gained about 4%. Hero MotoCorp and improved by 1.5% each. Increased 0.9% and ended up 1.3%.
Analysts say the imposition of export tariffs on steel inputs and outputs, as well as reduction of tariffs on inputs, is a stimulus for the sector, which has faced input cost problems.
“This is good for auto stocks because they are suffering from high input cost pressures. Steel exports from India may become unrivaled and domestic prices may fall which is good for the auto sector as they will be able to maintain margins, they will not. Says Gaurab Dua, Senior VP of Sharekhan. Bajaj Auto in two-wheelers and Mahindra & Mahindra in four-wheelers.
Analysts at Goldman Sachs say that over a historic 10-year period, Hero MotoCorp has rallied the most in response to excise duty reductions in general, and M&M has rallied the least.
Rising fuel prices are a major factor in reducing demand, especially in two-wheelers, he said.
Petrol and diesel prices have risen by 21% and 15%, respectively, in the last one year and by about 58% in the last two years. The two-wheeler space has suffered the most in the last three years due to rising total cost of ownership.
“While all original equipment manufacturers will benefit in different proportions, the main beneficiaries of the above measures in the auto sector will be Hero MotoCorp and Ashok Leyland,” said Motilal Oswal.