Automobile stocks outperform the broad market

MUMBAI: ET Automobile index gained 4.72% to outperform the broad market, represented by S&P CNX Nifty that rose 0.7% in the last week. Among automobile stocks, shares of Tata Motors gained the most with 10.12% increase in the corresponding period.

"Tata Motors have seen increased investor interest after it announced good numbers, especially in the foreign markets," says Srikant Shetty, head - equity advisory, Unicon Securities.

Automobile stocks have been moving up in sync with the broad market after a dull performance in the first half of the calendar year. Investors are also betting big on the possibility of a cut in interest rates, which should boost demand for new vehicles. Steady oil prices in international markets are also conducive for automobile demand next year, say analysts.

Going forward institutional investors are expected to bank on automobile stocks to play discretionary spending theme in India consumption story. Among the rural discretionary spending, two wheeler manufacturers such as Bajaj Auto and Hero Motocorp are preferred bets. "We prefer Tata Motors for medium term due to its attractive valuations," says Srikant Shetty.

He also likes Bajaj Auto in the two wheeler space as a medium term investment candidate. As the stocks have moved up quickly in a short term, there is little upside left in the immediate future, warn analysts.