Markets News: Equity Markets Face Caution Despite Buzzing Stocks According to Analysts Tracker
Analysts Tracker Highlights Market Trends
Tata Motors, Bajaj Auto, and Eicher Motors received the most analyst upgrades in August from a quarter ago, despite recent market volatility, according to Moneycontrol's Analysts' Call Tracker. But the upgrades do not necessarily reflect an overwhelmingly positive mood around auto stocks for two reasons.
- Over the past month, the number of upgrades were fewer – Tata Motors saw 3 additional buy calls while Bajaj Auto and Eicher Motors saw 1 each additional buy call.
- The optimism around Tata Motors and Eicher followed a series of downgrades earlier during the year.
Tata Motors now has 23 buys, 7 holds, and 5 sells, showing an increase from 20 buys, 8 holds, and 5 sells last quarter. Bajaj Auto shows 22 buys, 10 holds, and 13 sells, compared to 21 buys, 11 holds, and 13 sells previously. Eicher Motors has 17 buys, 12 holds, and 13 sells, up from 16 buys, 11 holds, and 14 sells last quarter.
Caution in Analyst Outlook
Overall, after the strong price performance over the past year, analysts are turning somewhat cautious on auto stocks. For the record, the three stocks gained 64 percent, 40 percent, and 130 percent, respectively, while the Nifty Auto gained 68 percent. All of them have outpaced Nifty 50's 26 percent during the period. Analysts believe such high returns are unlikely to continue in FY25.
Reasons are clear: vehicle sales, particularly in passenger vehicles (PV) and two-wheelers (2W), are already showing a slowing trend. Factors include high-interest rates, reduced pent-up demand, inflation, and rising vehicle prices, which are affecting sales.
Additionally, dealer inventories are rising, discounts are increasing, and a slowdown in wholesale dispatches may follow in the coming quarters.
Insights from Analysts
- Tata Motors: Analysts expect a soft outlook for JLR over the next two quarters.
- Bajaj Auto: Analysts believe Bajaj has a strong position in the Pulsar portfolio.
- Eicher Motors: Royal Enfield's retail volume growth has been muted.
Investors should be vigilant as trends persist, with expectations of flat or slightly declining operating margins in Q2 FY2025.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.