NEW DELHI: Auto sales are improving and that's showing in leader Maruti Suzuki's stock price, which is hitting new highs each passing day.
This is one sector, which is coming out of multiple shocks, such as the cash ban, regulatory changes like transition to BS IV norms, and GST rollout, among others.
Analysts feel that likely sops for agri and rural India may benefit two-wheeler makers and farm equipment firms such as Hero MotoCorp, TVS Motor and M&M.
They see a few restrictions in commercial vehicle (CV) space to increase volumes for CV players such as Ashok Leyland and Eicher Motors. Electric vehicles too may get a lift and may influence players for first movers such as Tata Motors and M&M.
The BSE Auto index has gained 22 per cent in the last one year compared with 32 per cent rise in BSE Sensex during the same period.
"We do not expect any changes in indirect taxes. However, we expect higher allocation toward rural-focused schemes," said Motilal Oswal Institutional Equities in a note.
The brokerage said that focus on rural markets could place the two-wheeler industry back on the growth path. It is positive on Hero MotoCorp, TVS Motor and M&M.
Motilal Oswal Securities expects introduction of a scrappage scheme, which would incentivise scrapping of trucks older than 10 years. Depending on whether it is mandatory or voluntary, the move could drive 15-18 per cent CAGR for CVs players from around 12 per cent at present. Ashok Leyland and Bosch are plays on the theme.
Sharekhan expects GST rate on electric vehicles to be reduced to 5 per cent from 12 per cent. The brokerage also expects additional incentives such as exemption of road tax to promote sales of electric vehicles.
Reforms targeted at improving farm income/farm yields coupled with the likely increase in rural allocations would be positive for tractor companies such as M&M and rural-focused companies such as Hero MotoCorp, it said.
Meanwhile, IIFL Wealth Management sees high possibility of extension of custom duty concessions for additional critical components for electric vehicles. It sees reduction in cess for hybrid vehicles to zero, which would be good for Maruti Suzuki and M&M.
There are also expectations that the government may exempt 10-13 seater ambulances from the levy of compensation cess. There could be fund allocation for vehicle fleet modernisation plan by STUs and an announcement of mechanism by which transporters can set off GST on goods transportation with input credit for tax paid on fuel expenses. These expectations have probability rated as 'medium by IIFL Wealth Management.