Investors counting on India's upcoming Festival Season to revive the fortunes of the nation s automobile stocks could be in for a disappointment.
Below-average monsoon rains that have affected Indian demand and the impending threat of third coronavirus waves are posing a hurdle to rural vehicles makers. The global auto industry is facing the problems of rising input costs and a semiconductor shortage that both present at higher prices.
A gauge of Indian automobile shares has lost 2.5% so far this quarter, the only loser among 19 sector groups by BSE Ltd.'s 19 segments. The benchmark S&P BSE Sensex lost 12% during this period, while the MSCI World Automobiles Index is up 3.4%.
Passenger vehicle sales in India will be weak in the quarter ending September, which normally signals demand for festival season that starts in October, according to Amit Hiranandani, an analyst from SMIFS Ltd.
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To make matters worse, production challenges have already forced customers to wait for up to four months for the delivery of vehicles, which means there s uncertainty whether orders will be met during festive season, according to Hiranandani.