Weak macro factors seem to be taking a toll on Indian auto companies, as the S&P BSE Auto Index and Nifty Auto fell 1.59% and 1.56% each on the back of the overall decline in the market sentiment.

Among the auto and auto ancillary stocks, Maruti was down 0.26%, Hero Motocorp  fell 4.42%, Eicher Motors slid 5.54%, while Bosch was down by 2.16%. Market trackers suspect the overall weakening of the equity market post the sharp fall across the auto sector.

"Auto sector was like the last man standing, but as the broad market facing relentless selling pressure, even auto stocks have started melting. It’s not just the auto stocks falling. Actually the entire market is falling. Recovery can be expected only alongwith overall market recovery,” said Jagannadham Thunuguntla, senior VP & head of research (wealth) at Centrum Broking.

And Thunuguntla is right. While the overall market has been on a decline trend, auto stocks have defended themselves for the last few weeks.

In the wake of petrol prices hovering at  ₹91.20 a litre and diesel at  ₹79.81 a litre, auto industry has seen a big blow.

According to a late-September report from Nomura Securities; higher fuel prices, rising interest rates and increased insurance costs are a set of challenges that the auto industry has to tide over. “Rising crude prices and adverse currency movement have increased input costs for companies,” Nomura said in its report. The report also said that increasing GST cess on luxury cars could impact car sales in the segment.

Auto analysts said that Kerala floods also had a major impact on industry’s performance but the industry is expected to recover in the upcoming festive season.

“From last couple of months, we’re doing a negative growth. There are 10 more days left for the festive season which has been delayed already. The negative consumer sentiment is specifically because of the rising fuel prices. And the depreciating rupee against the dollar is also a major concern for us,” said Gaurav Vangaal, senior auto analyst at IHS Markit.

“But I think, in October we should report a good demand as the companies are ready with their new inventories.”

A not so good monsoon along with macro economic challenges could however stretch the recovery and it may take time for investor sentiments to improve.

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