For investors in Indian automobile stocks, 2018 has been a tough year. They will hope the history repeats itself in September.
The month, which marks the start of festival season, is traditionally strong for shares of automakers. In eight out of the last nine years, the Nifty Auto Index returned gains in September.
But so far this year, the gauge has fallen over 8 percent compared with the NSE Nifty 50 Index's 10.5 percent gain. And in five of the last eight months, it ended in the red. The index rose in July and managed to stay in the green in August.
The automobile index seems to have bottomed out after consolidating for three months, said Chandan Taparia, associate vice president at Motilal Oswal Securities Ltd. “It (the index) has taken support close to 10,500 (levels), which also happens to be the previous high, and one can expect it touch 11,500.”
Taparia's top stock picks in the sector include Maruti Suzuki India Ltd., Mahindra & Mahindra Ltd. and TVS Motor Company Ltd.
October has also been a seasonally good month for the sector, with the index closing with gains in each of the last five years.
The second half of the calendar year in India marks the start of the festive season, comprising festivals such as Ganesh Chaturthi, Dussehra and Dhanteras before Diwali. Indian households purchase gold or automobiles during this period, which is considered auspicious.
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