Auto ancillary stocks shine as recent correction could spur rally, says Kotak Equities

The growing trend of premiumisation along with the shift towards electric vehicles (EVs) signals positive prospects for the companies

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The share price of auto ancillary stocks such as CIE Automotive India, Uno Minda, and Varroc Engineering witnessed an uptick on March 18 after Kotak Institutional Equities upgraded its rating to ‘add’ from ‘sell’, suggesting that the recent correction and rising demand could help the companies.

At 11:10 am, the CIE Automotive India stock was trading at Rs 440, up 1 percent from the previous close, while Uno Minda was trading higher by nearly 2 percent to Rs 622. Varroc Engineering shares shed early gains when the stock edged higher by about 2 percent.

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Steady demand trends in the two-wheeler segment bode well for the companies, Kotak said in a recent note. Additionally, the growing trend of premiumisation along with the shift towards electric vehicles (EVs) also signals positive prospects.

Uno Minda is expected to maintain its outperformance compared to industry growth, benefitting from these favourable market dynamics, while attractive valuations are driving an upgrade for CIE Auto and Varroc Engineering.

Moreover, global brokerage house Nomura has suggested the recent EV policy, created largely to attract major global players such as US-based Tesla to set up manufacturing units in India, could help companies such as Sona Blw Precision Forgings, and Motherson Sumi Wiring India.

The shares were trading higher by 1.5 percent to Rs 650, and 3 percent to Rs 64, respectively.

Moneycontrol PRO: Is the EV policy a bait for Tesla or a bet on realising India’s manufacturing potential?

According to the EV policy, companies that can establish EV manufacturing plants with a minimum investment of Rs 4,150 crore will receive benefits, including the ability to import cars at reduced customs duty rates. These companies are required to set up manufacturing facilities within three years and there’s no limit on the maximum investment of the company.

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