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M&M, Tata Motors, other top stocks to buy as auto stocks hit top gear

M&M, Tata Motors, other top stocks to buy as auto stocks hit top gear

Auto stocks to buy: Auto stocks extended their rally for the third consecutive session on Monday. The Nifty Auto index rose 1.09 percent to 11,709.35 points. The index is up 7.61 percent in three trading sessions. Maruti Suzuki India (up 1.4 percent), Ashok Leyland (up 1.18 percent), Sona BLW Precision Forgings (up 1.13 percent), Mahindra & Mahindra (up 0.92 percent) and TVS Motor Company (up 0.71 percent) higher.

After experiencing headwinds in recent quarters due to increased costs due to rising raw material prices, supply chain issues, volatility in fuel prices and higher vehicle prices. Auto stocks extended their rally given the stability in metals prices that had raised concerns about margins.

“Positive for the central heating sector, as all underlying drivers are present. Positive for PVs and demand on the ground looks strong coupled with the strong order book. Cautiously positive about tractors and two-wheelers. Have to wait and look forward to their sequential improvement,” said Ashwin Patil, Senior Research Analyst at LKP Securities.

The Nifty Auto Index is up 20 percent since its lows in March and appears to be the biggest gainer of all sectors, pricing in the expected benefits of falling commodity prices, especially steel and aluminum, the main material for making vehicles. resulting in lower cost pressure.

“The automotive sector will also see benefits from cooling commodity prices such as steel and aluminum. New steel contracts can be closed at a lower price, which will help improve margins. The chip shortage will also decrease significantly in the coming quarters, allowing top OEMs (Original Equipment Manufacturers) to increase production,” said Naveen Kulkarni, Chief Investment Officer at Axis Securities.

Meanwhile, Morgan Stanley said the volume outlook for all segments is constructive and companies have made price increases, but cost pressures are easing.

On price increases, Punit Patni, equity research analyst at Swastika Investmart, said: “Automotive companies had increased their prices due to rising commodity prices, and these increases are not expected to reverse, so if key commodity prices cool, these companies will witness a significant boost in their operating results.”

Handy Auto Technical Outlook

Tirthankar Das, head of technical research, Ashika Group, said: The auto sector has witnessed a sustained increase in recent weeks. Currently, the sector is on the brink of an upward breakout of cluster resistance from the up and down trendline around 10,600. A sharper move from here could therefore have a significant positive impact for the sector. Positive chart patterns such as higher tops and bottoms are still present in a weekly time frame. There are no signs of reversal yet on the oscillator front, the weekly 14-period RSI remains positive.

Top stock picks from the automotive sector

Morgan Stanley is overweight Maruti Suzuki, Ashok Leyland, Tata Motors, M&M and Eicher Motors. “We are equally heavy in Bajaj Auto & Samvardhana Motherson, while we are underweight in Amara Raja Batteries, TVS Motor Company and Hero MotoCorp,” a report said.

Picking auto stocks to invest in, Patni said: “The outlook for the industry remains positive from a medium to long-term perspective. Most of the issues, such as high commodity prices, semiconductor shortages and covid-induced disruptions, are declining and demand is witnessing an uptick.”

Maruti Suzuki

The company is poised to perform well in the medium to long term thanks to the improvement in product offerings and the cooling of key raw material prices. Furthermore, the affordable segment i.e. below Rs. 10 lakh, the company’s main focus area is expected to perform well on the margin front due to a slowdown in commodity inflation. This segment is extremely price sensitive and the company faced the problem of the inability to raise prices without sacrificing volumes. We expect this problem to decrease in the future.

TATA engines

The company has witnessed a complete makeover after the change in management. The company has gained market share thanks to its phenomenal product offering. The company has been able to capitalize on the trend of increasing customer preference and awareness for safety and build quality; the company’s new offering has received critical acclaim, especially in this regard. Furthermore, the company is one of the largest beneficiaries of the transition from ICE to EV because of the first-mover advantage and synergistic benefits of other group companies.

Ashok Leyland

Due to the effects of covid decline, government spending on infrastructure, growing construction activity and rising demand from the replacement side, demand for resumes is expected to make a comeback. One of the big winners from the increased demand for resumes is this company. In addition, the lack of semiconductors caused light commercial vehicles to experience supply-side problems. LCVs are expected to resume normal activities if the signs of procrastination are visible.

Ashika Group’s Tirthankar Das said his stock selection is M&M, LG Balakrishnan & Bros Ltd.

M&M

The stock has been consolidating between 980-1050 for over a month. This consolidation takes the form of a ‘Flag’ formation. Price has now broken out of the pattern with a broad candle and an increase in volume. This momentum predicts the start of an uptrend in the stock. One can accumulate the stock at the current level for a medium to long term upward target of 1.125.

LG Balakrishnan & Bros Ltd

The price rebounded after gaining support in the 23.6 percent retracement area of ​​the 2-year rally (High:736; Low:145), signaling further upward momentum. On the oscillator side, the 14-period RSI has recovered from oversold territory and generated a buy signal, validating a positive bias. Collect the stock at the current level for a short-term upward target of 670.

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