Midcap and small cap automotive companies have been consistently outperforming their mega counterparts through the last year. Companies including Motor Industries Company (MICO), Cummins India and Amtek Auto have been showing consistent improvement in their total returns to investors over the last year.
A close watch reveals that the rally has been more prominent in auto ancillary stocks than the frontline, big carmaker stocks. Market watchers feel that the reason for this is a renewed focus on outsourcing from global majors including GM and Renault from India.
The CEOs of GM and Renault have reiterated the importance of outsourcing from countries such as India during their recent visits. This means that the auto ancillary companies would do well in terms of numbers,” said Deven Choksey of KR Choksey Securities. Stock prices of these companies are much lower than their bigger cousins. This has played a role in shifting investor focus towards these companies, he said.
Investors indeed seem happy. MICO’s net return to investors was a whopping Rs 394.57, an appreciation of 11.27 per cent. Punjab Tractors gave Rs 48.3 while Cummins and Amtek gave Rs 28.62 and 27.85 respectively.
In comparison, Bajaj Auto and Tata Motors cost investors Rs 173.85 and Rs 149.85 respectively. “The reason,” said Choksey, “lies in numbers managed by major carmakers in the last two months.” Maruti, Tata Motors and M&M have all shown less than average growth in the last quarter or two.
In the last quarter, Hindustan Motors, Maruti Udyog, Hero Honda and Mahindra & Mahindra all gave negative returns, while Bajaj Auto gave marginal positive returns of 0.806 per cent.
In comparison, Tube Investments, a company operating in cycles, engineering (primarily automotive components) and metal forming (car doorframes for Hyundai and Maruti) has given 28.134 per cent return in the last quarter.
Hindustan Motors stock has taken the most beating in this period owing to negative flow of news concerning a strike and possible lockout at its Uttarpara plant. The street has also punished both Punjab tractors as well as Mahindra & Mahindra, despite the high-profile takeover of the North Indian tractor and farm equipment manufacturer by the Mumbai carmaker.
Tyre companies too have been picking up steam. Both Apollo tyres and MRF have started giving positive returns to investors, reversing a trend over the last year. MRF returned Rs 10.084, while Apollo has given Rs 12.846.