Auto stocks extend gains on proposed scrappage policy, better January sales data


Equity market continued on its upward trajectory on February 2, a day after rising almost 5 percent. At the time of writing this copy, Sensex is up 1,078.03 points or 2.22 percent at 49678.64, and the Nifty jumping 318 points or 2.23 percent at 14599.20.

The auto index jumped 3 percent, gaining over 7 percent since the Budget day. The move comes after Finance Minister Nirmala Sitharaman in her Union Budget 2021 speech proposed voluntary scrappage policy to replace personal vehicles older than 20 years and commercial vehicles older than 15 years.


The move is expected to be positive for the auto sector as it would support vehicle sales, especially commercial vehicles in the long-run.

Kenichi Ayukawa, President, Society of Indian Automobile Manufacturers (SIAM), said, “The vehicle scrappage scheme has a good intent and the auto industry will be keen to work with the government on suggestions for maximising benefits to environment and society”.

Among auto names, Tata Motors was the top gainer jumping 10 percent followed by Ashok Leyland, TVS Motor and Maruti Suzuki.

Tata Motors on February 1 reported a 25.27 percent increase in total sales at 59,959 units January. The company had sold a total of 47,862 units in the same month last year, Tata Motors said in a statement. Total domestic sales were up 28 percent at 57,742 units as compared to 45,242 units in January last year, it added.

Ashok Leyland share price advanced on the back of January sales numbers. The company in the month of January 2021 has posted 11 percent jump in its total sales at 13,126 units against 11,850 units in January 2020. The light commercial vehicle sales were up 40% at 5,752 units versus 4,096 units and total M&HCV sales were down 5% at 7,374 units versus 7,754 units.

Morgan Stanley has kept overweight call on the stock and raised the target price to Rs 155 from Rs 63 per share. Driven by the Budget-led infra push & better pricing, earnings face upside surprise, while scrappage policy could add upside, reported CNBC-TV18.

Harshad Chetanwala, Co-Founder- in an interview to said that the sales data for January for the auto sector has been encouraging and has signs of revival after very difficult times during COVID-19. With things quickly getting normalized, the demand for cars would increase.

“The vehicle scrapping policy announced in the budget today will boost the overall auto sector in the coming days,” he added.

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