Auto ancillary ramping up

Auto ancillary companies are ones that supply equipment and other products to automakers. Stocks of these companies are making stories in Indian market since past 2-3 years with returns ranging from 16 per cent to 810 per cent.

Automakers, who are main revenue drivers of auto ancillary, can witness a renewal in consumption demand in urban as well as rural area. This revival in demand is likely because of the implementation of the 7th pay commission recommendation and good monsoon rains which is as per the prediction until now.

We have analysed auto ancillary companies' last one-month performance.  We observed that 40 companies have given return more than 1 per cent and 18 companies have witnessed more than 10 per cent growth over the month. In auto ancillary universe, we have picked up our top five performers. The names includes- Castex Technologies, Bharat Gears, JMT Auto, Autolite (India) and Rico Auto Industries.



Castex Technologies has given highest returns of 68 per cent in previous month. Bharat Gears, JMT Auto, Autolite (India) and Rico Auto Industries have managed one month return of 19 per cent and above. Bharat Gears and Autolite (India) posted sound financial numbers in FY16. JMT Auto experienced rise in promoter's stake in its shareholding pie. While not only Rico Auto Industries but JMT Auto also successfully reduced their debt in fourth quarter of FY16. These factors have triggered the stocks on individual basis.

Let’s see how this auto ancillary will perform in long run tenure. Will they follow same storyline or there will be more to watch out for?