M&M, Tata Motors, Bajaj are good buys

Vehicle sales in India are expected to remain under pressure for the near term but stock pickers see some silver lining that favours some automobile companies.

The positives for the auto sector are good monsoons and the upcoming festival season but the weak rupee could be a boon for some like Bajaj Auto, which earns a good chunk from exports.

"Auto sales are expected to remain under pressure in the second quarter as well as demand continues to remain subdued," said Yaresh Kothari, research analyst for automobiles at Angel Broking.

Factors that impacted growth in the first quarter such as a slowdown in economic activity, poor consumer and business sentiments and higher fuel prices are expected to continue impacting demand.

"We expect some pickup in two-wheelers on account of low base and good monsoons," said Mihir Jhaveri, director, institutional research, Religare Capital Markets. "We expect recovery to start from the second half," said Sahil Shah, manager, Edelweiss Financial Services.

A weak rupee will be negative for Maruti Suzuki where the yen-denominated imports are 25% of sales, thus making imports costlier, said Shah.

"M&M (target price: ₹1947) is a top pick from the long-term point of view,' said Shah.

'Our top picks are Bajaj Auto (target price: ₹2,200) and Tata Motors (target price: ₹350)," said Jhaveri.

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