Indian Automobile – To cruise ahead, despite the speed-breakers

Indian auto companies have been reporting strong volume sales for the past few quarters. Upbeat consumer sentiments, benign interest rates and new launches have been the key factors responsible for the stupendous growth witnessed by the Indian Automobile industry. However, there exist near-term concerns in the form of a possible rollback of Excise duty or Fiscal stimulus in the upcoming Union Budget, and likely Margin pressure due to higher Raw Material costs going forward for Indian automobile companies. However, we believe that these are short-term hurdles for the sector, which will be overcome with the passage of time. On the long-term basis, we remain positive on the Indian Auto Sector. Overall we believe that the comparatively low penetration levels, a healthy economic environment and favourable demographics supported by higher per-capita income levels are likely to work in favor of the Indian Auto sector, which would help in sustaining a relatively high growth pattern over the next few years.

By Ms. Vaishali Jajoo, Sr. Research Analyst, Auto & Auto-ancillary, Angel Broking