Today’s top stock picks recommended by experts include M&M, Maruti Suzuki, Tata Motors, Bajaj Auto, and Hero MotoCorp.
Following the announcement of India’s impressive gross domestic product (GDP) for the third quarter of the current fiscal year, auto stocks are experiencing significant demand in early morning trading on Friday. Tata Motors shares have surged over 2 percent, Mahindra & Mahindra (M&M) shares have risen by around one percent, Bajaj Auto shares have gained approximately 2 percent, Hero MotoCorp shares have seen an increase of around 1.50 percent, while Maruti Suzuki and Ashok Leyland shares have both gained nearly one percent in early morning deals on Friday.
Stock market experts attribute the uptrend in auto stocks today to India’s real GDP growth for Q3FY24, which has exceeded expectations at 8.4 percent. This positive GDP growth trend reflects a healthy national economy, providing favorable conditions for various sectors including auto, banking, and real estate. A robust economy typically translates to increased purchasing power, driving demand for automobiles, residential real estate, and other consumer goods.
Experts are particularly bullish on the auto, realty, and banking segments within the strong Indian economy. They emphasize that higher income levels contribute to increased spending on residential real estate, cars, and bikes, thus boosting the performance of companies within these sectors.
For investors looking to capitalize on this trend, experts recommend considering long-term investments in stocks of prominent companies such as M&M, Tata Motors, Maruti Suzuki India, Bajaj Auto, and Hero MotoCorp. These companies are expected to benefit from the positive economic conditions and sustained growth in consumer spending.
Nikhil Gupta, Chief Economist at Motilal Oswal, highlighted key insights from India’s GDP data for Q3FY24, noting a significant growth of 8.4% YoY, surpassing market forecasts of 6.5-7%. Additionally, the last two quarters saw upward revisions to growth rates, with FY22 revised to 9.7% and FY23 adjusted to 7%. Notably, a sharp 32% YoY increase in net taxes contributed to the 8%+ GDP growth, with real GVA growth at 6.5%. The decline in the farm sector was offset by double-digit industrial growth and robust services.
Avinash Gorakshkar, Head of Research at Profitmart Securities, attributed the rise in auto stocks to a strong economy, where increased purchasing power leads to higher spending on homes and vehicles. With higher incomes, individuals tend to upgrade their homes and vehicles, driving demand in these sectors.
According to Sandeep Pandey, Founder of Basav Capital, there exists a thumb rule in the market suggesting that the Nifty 50 index typically grows two to two and a half times annually compared to the growth rate of India’s GDP. With India’s GDP consistently growing at around 8 percent in the previous three quarters, this growth is anticipated to reflect in the stock market. Following this rule, one can expect the 50-stock index to grow approximately 16 to 20 percent in FY24. This growth is expected to be driven by alpha returns in sectors such as auto, banking, and real estate, which are likely to attract the majority of investments in the upcoming sessions.
Top Picks in Auto Stocks for Your Portfolio
Sandeep Pandey recommends adding the following auto stocks to your portfolio for potential long-term gains:
- In the four-wheeler segment: M&M, Maruti Suzuki, and Tata Motors
- In the two-wheeler segment: Hero MotoCorp and Bajaj Auto
These companies are anticipated to deliver stellar returns over the long term, making them attractive options for investors looking to diversify their portfolios with auto stocks.
Disclaimer: The views and recommendations mentioned above are those of individual analysts or broking companies, and do not represent the views of Bystox. We encourage investors to consult certified financial experts before making any investment decisions.