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Lagging auto stocks face risk of festival season fizzle

Bloomberg September 16 | Updated on September 16, 2021

Gauge of auto-mobile shares has lost 2.5 per cent so far on the BSE this quarter

Investors counting on India’s upcoming festival season to help revive the fortunes of its automobile stocks could be in for a disappointment.

Below-normal monsoon rains that have impacted rural demand and the risk of an impending third coronavirus wave are posing a challenge for vehicle makers. That’s in addition to the problems of rising input costs and a semiconductor shortage the global auto industry is faced with.

A gauge of auto-mobile shares has lost 2.5 per cent so far this quarter, the only loser among the BSE’s 19 sector groups. The benchmark S&P BSE Sensex has rallied 12 per cent during this period, while the MSCI World Automobiles Index is up 3.4 per cent.

Also see: Auto sector gets ₹26,058-crore PLI scheme to push new tech, clean fuels

Passenger vehicle sales in India will be weak in the quarter ended September, which normally signals demand for the festival season that starts in October, according to Amit Hiranandani, an analyst at SMIFS Ltd.

To make matters worse, production challenges have already forced customers to wait for as long as four months for the delivery of vehicles, which means there’s uncertainty whether orders will be met during the festive season, according to Hiranandani.

Published on September 16, 2021

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