Top 5 gainers and losers of auto sector in March

Auto stocks fuelled most rallies in the Indian equity markets. Frontrunner index stocks like Maruti Suzuki, Bajaj Auto, M&M have been investors' all-time favourites. But the story has been different this March, automakers announced production cuts and stocks fell. 

Been a consumer-driven aspirational product, auto stocks have always attracted premium valuations and at the same time given good returns to investors. Maruti Suzuki announced production cuts in March, followed by other major Indian automakers guiding to a similar cut. Recently, Maruti said in a regulatory filing that its overall production across different models was down by 21 per cent in March 2019. 

The pain in the auto sector started as a trickle-down effect of the NBFC crisis. When the non-banking finance company (NBFC) behemoth IL&FS defaulted its interest payment in September 2018, it exposed the bad debts in the NBFC sector, thereby curtailing credit flows from commercial banks and other financial institutions to NBFCs. With liquidity crunch at NBFC, who are the primary lenders to auto dealers as well as a leading provider of auto loans to customers, Indian automakers failed to register good auto sales for the festive season of Diwali and from then on auto sales have been lacklustre causing a pile-up of inventory with the dealers. 

Despite the stress seen in the auto sector, we have a few surprises. Here is an analysis of auto stocks' performance in March compared with the BSE Sensex and BSE Auto indices.  

The Good 

As seen in the above table, when other auto stocks were bleeding SML Isuzu registered 26 per cent gains in March.

The Bad

Compared benchmark index auto stocks might have seen some losses, but in terms of standalone returns, they still managed to be in the positive.  

The Ugly

Here we see the rural market focused auto stocks like Hero Moto and VST Tillers losing significantly in the month of March.