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Our Bureau

Mumbai, Aug. 7 Value buying over the last month has lifted the BSE Auto index 12.97 per cent during the period.

Declining crude prices also gave the index a boost, helping it beat the BSE Sensex, which went up 11.8 per cent.

The scrips in the auto index have gone up by between 12 per cent and 26 per cent during this period.

Ashok Leyland has gone up 12.16 per cent, Bajaj Auto (28.71 per cent), Bharat Forge (13.37 per cent), Cummins (26.17 per cent), Escorts (28.13 per cent), Hero Honda (18.7 per cent), Mahindra & Mahindra (16.63 per cent), Maruti Suzuki (16.27 per cent) and Tata Motors gained 12.72 per cent.

The auto sector, which is an interest sensitive sector, was badly battered as inflation soared to new highs. Most of these scrips recorded new lows in early July.

“Since most of the scrips witnessed a sharp fall during the overall market decline, their valuations have become quite comfortable now. A lot of this bounce back in the auto share prices could be because of this,” said Mr Alex Mathew, Head of Research at Geojit Financial Services Ltd.

Mr Piyush Parag, Research Analyst-Auto, Religare Securities, said the expected slowdown in the sector has been discounted already and that the valuations of these scrips look good

“The price of crude oil has fallen more than $30 in the last month, which is a good sign for the sector. And it is highly unlikely that it will surge to such high levels in the near future.

"The rate at which inflation is rising is also slowing down, which is again a good thing for this sector,” said Mr Sanjay Someshwar, a sub-broker with Ventura Securities.

According to data available on the Value Research Web site, the average return of funds, which focus on the auto sector, in the last one month, has been more than 14.4 per cent.

Against this, the funds that focus on the Sensex have given average returns of 12.04 per cent and those focusing on the Nifty have given 12.49 per cent returns.

Mr Anup Maheshwari, an auto research analyst with KR Choksey Shares and Securities, said he would advise investors to be cautious on this sector, but that they could do some value buying.

“There are still concerns about raw material costs, which will negatively impact the margins of these companies. Also, there is a possibility that crude prices might go up. But at the moment, things are looking up for the sector and one should do some selective buying, as the share prices of most of these scrips have fallen to very low levels,” said Mr Maheshwari.

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