The auto sector in India is one of the most important segments of the economy. IBEF reports that in FY23, India’s annual automobile production crossed the 25 million mark. The segment is also well-placed for tremendous future growth, with projections suggesting that India’s auto industry may be valued at $300 billion by 2026.
Against this backdrop, it is understandable that market experts and analytics consider the auto sector a prime investment hotspot. For traders and investors eager to capitalise on this anticipated growth, tracking the Nifty Auto Index is an excellent place to begin. Traders can monitor changes in the Nifty Auto Index and attempt to profit from the fluctuations using index options and futures. Nifty Auto BeES, more commonly known as the Nippon India Nifty Auto ETF, is another way to trade a portfolio of auto stocks. Investing in the ETF is another attractive proposition for long-term investors.
Whether you are a trader or an investor keen on tracking the Nifty Auto Index and leveraging the prospects of India’s automobile sector, it’s important to know the latest news from this market segment.
The Hottest Stories from the Auto Sector in India
The auto sector in India has witnessed many major milestones and a few setbacks in recent years. The Nifty Auto Index has reacted strongly to many of these triggers. Check out some of the stories with the biggest impact on this sector, so you can better assess how any new changes may affect auto stocks.
- Supply Chain Challenges and Recovery
In the thick of the pandemic and the months that followed, India’s auto sector suffered from various supply chain challenges and constraints. SIAM reported that 2021 was the worst-performing year for the industry in terms of automobile sales, with only 17.51 million units sold in that period. The year got off to a discouraging start, with the Nifty Auto Index falling by around 3% in January 2021. However, with eventual recoveries in the supply chain and a sharp rise in sales revenue, the sector bounced back, as did the Nifty Auto Index, which rose by over 15% in 2022. Subsequently, the auto sector has performed notably, with the Nifty Auto Index rising by around 42% in 2023 and delivering YTD returns of 44.63% as of September 26, 2024.
- Technological Innovations Driving the Sector
India’s auto sector is also rapidly advancing through cutting-edge technological innovations. Autonomous driving technologies, though still in the nascent stages, are making headway with features such as adaptive cruise control and lane-keeping assistance. These semi-autonomous capabilities aim to increase safety and ease driving in India’s traffic-heavy conditions.
Connected car technologies are another key innovation, with vehicles now integrating real-time diagnostics and offering seamless communication with external devices. This ensures better traffic management and improved safety on Indian roads. Advanced manufacturing techniques like automation and smart factories are also revolutionising vehicle production in India.
Driven by government initiatives and a growing push for sustainability, India’s electric vehicle (EV) sector is expanding rapidly. The rise in electric two-wheelers has been significant, with nearly 86% of consumers considering them for their next purchase. This trend is supported by the government’s ambitious aim for 80% of two-wheelers and three-wheelers and 30% of private cars to be electric by 2030.
Traditional automakers face disruption as EV companies challenge their market dominance. They are, however, adapting to remain relevant and rolling out new EV offerings and innovations. For retail investors, this EV growth presents opportunities in stocks of companies involved in EV manufacturing, infrastructure and batteries. With the market expected to grow exponentially, investments in this sector could also yield long-term returns.
- Green Energy in Auto Manufacturing
India’s auto sector is also increasingly embracing green energy and sustainable practices in manufacturing. Many companies have adopted renewable energy sources like solar and wind to power their production facilities and reduce their carbon footprints. This shift is a response to both government incentives and rising global environmental standards.
Sustainable practices are also being incorporated throughout the supply chain, with manufacturers pushing suppliers to adopt greener methods like using recycled materials or low-carbon alternatives in production. Consumers are responding positively to these eco-friendly initiatives too. A Deloitte survey revealed that around 50% of Indian consumers chose to move away from traditional internal combustion engine (ICE) vehicles in favour of more environmentally friendly options, particularly hybrid electric vehicles (HEVs).
- Government Policies and Regulations
The Indian government has introduced several policies to push the automotive sector toward sustainability. Notably, the Bharat Stage VI (BS-VI) emission norms, which came into effect in 2020, have set strict standards to reduce air pollution and led to cleaner vehicle production.
The FAME-II scheme, which offers incentives for both buyers and manufacturers of electric vehicles (EVs), supports the adoption of cleaner technologies in the auto sector. Additionally, the Electric Mobility Promotion Scheme was also introduced to encourage domestic EV manufacturing.
The PM E-Drive scheme is another important initiative by the government in this context. Approved recently, on September 11, 2024, this scheme is poised to replace the existing FAME programme. The government has allocated a budget of Rs. 10,900 crore for two years under the PM E-Drive scheme, which will offer subsidies for electric two wheelers, three wheelers, and buses.
Nifty Auto Index as an Investment Tool
The Nifty Auto Index serves as a crucial benchmark for investors looking to capitalise on India’s dynamic automotive sector. Composed of the top 15 auto and auto component stocks listed on the National Stock Exchange, this index offers a comprehensive snapshot of the industry’s performance.
As the auto sector navigates the transformative trends outlined above, like the green shift, technological advancements and changing consumer preferences, auto stocks may be significantly impacted. Companies successfully adapting to these changes may see positive stock movements, which will be reflected in the Nifty Auto Index.
If you want exposure to this sector along with the opportunity to capitalise on short-term price fluctuations, Nifty Auto BeES presents an attractive option. This exchange-traded fund (ETF) mirrors the Nifty Auto Total Return Index and provides a cost-effective way to invest in a diversified portfolio of auto stocks. As the auto sector continues to evolve, the Nifty Auto Index and associated investment products like Nifty Auto BeES offer a reliable means to participate in the industry’s growth story.
Options Trading in the Auto Sector Made Easier with Samco’s Options B.R.O
As we approach the upcoming earnings season, auto stocks are likely to experience increased volatility based on quarterly results and market reactions. By keeping an eye on the latest performance news, you can better anticipate market movements and aim to leverage them using options.
Samco’s Options B.R.O. can be a game-changing tool in this context. It offers a strategic advantage to traders with a Samco Securities trading account by providing tailored options trading strategies suited for different market conditions.
With additional insights into risk, potential returns, maximum gain and loss data and more, Samco’s Options B.R.O. can help you identify the best strategies to capitalise on fluctuations in the Nifty Auto Index. Whether you’re looking to hedge your positions or maximise potential gains, Options B.R.O. simplifies the process, allows you to make informed decisions swiftly and to implement complex strategies right from the app itself.