The Indian automobile industry is the fourth largest in the world and has an annual turnover of $100 billion with around 32 million people employees. Investing in the automobile sector can reap you the benefits only if you are well-aware of the best auto stocks in India. Auto Ancillary sector is one of a kind sector, where there will always be a demand.
In order to align with the growing demand, several automakers have also started investing heavily in various segments of the industry during the last few months. The industry has also attracted Foreign Direct Investment (FDI) of US$ 23.89 billion from April 2000 to December 2019, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
If you are a novice investor, auto stocks may bring out the impulsive decision person making in you as there are a lot of automobile shares that look good before investing but can take a toll on you later. In this article, you will get all the required knowledge and the list of best auto stocks to buy in India as well.
What are the factors to consider before investing in auto stocks?
Factors to be taken into consideration while investing in auto stocks is which segment they service and its growth prospects. A diversified customer base and wide geographical presence are preferable too. You can also check out the management’s record and the company’s valuation. However, there are always certain companies whose analysis shows good potential in the long term fundamentally.
Top auto stocks in India
The automobile industry is a vast one and also the biggest contributor to India’s GDP. There are a ton of publicly listed companies trading on the Indian stock markets. Thus, there are plenty of automobile stocks worth looking at, some like Eicher Motors (the parent company of Royal Enfield) have a great track record and if someone had bought Eicher shares instead of its motorcycles in the early 2000s, they would have made fortune for sure.
As mentioned earlier, there is a plethora of automobile sectors to choose from. A seasoned investor knows the pros and cons of each stock and invests accordingly. However, there are some stocks that are well renowned, and owing to past records, one can always say that these are worth investing in. Below given is the list of top stocks along with the details.
Eicher Motors Ltd. is a renowned Automobile industry that manufactures two & three-wheelers. Headquartered in New Delhi, it was incorporated in 1982. The current market capitalization stands ₹38,530 Cr. Some of the factors that put Eicher motor stock in the top are:
- The company has been able to generate Net Cash and the net cash flow has been improving for the last 2 years.
- Book Value per share and Annual Net Profits have also increased since the last 2 years
- This Company also has Zero Promoter Pledge
- It’s an automobile company with very Low Debt
Tata Motors Ltd. is one of the leading companies in Automobiles-Trucks/Lcv manufacturing in India. Headquartered in Mumbai, the company was incorporated in the year 1945. Some of the key features that can encourage you to buy Tata Motors share are:
- Its shares have Growth in Net Profit with increasing Profit Margin (Quarterly)
- The revenue has been increasing every quarter for the past 2 quarters
- Profits have shown an increase every quarter for the past 2 quarters
- The company has been able to generate Net Cash
- A Tata Motors share has typically low Price Earnings ratio (PE < = 10)
Maruti Suzuki India Limited
Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an automobile manufacturer in India. The company is a subsidiary of a Japanese company, Suzuki Motor Corporation which also held a 56.21% stake in Maruti Suzuki as of 31 December 2017. Some of the factors that make it a good company to invest in are:
- Maruti Suzuki has a very low debt which makes it one of the best auto stocks in India
- The company has been able to generate Net Cash and constantly improved the net cash flow for the last two years last 2 years
- Book Value per share has also been comparatively better and improving for the last 2 years
- Also, the company has Zero Promoter Pledge
Honda Motor Company Ltd
Honda Motor Company (further Honda or Company) is a Japanese motorcycle, automobile, aircraft, and engine manufacturing company. Founded in 1948 by Soichiro Honda, as an automotive parts manufacturer, Honda later moved on to motorcycles manufacturing and has now become one of the world’s largest motorcycles manufacturers. Some of the factors that makes the stocks of this company worthwhile are:
- The company’s core product is competence in engine manufacturing
- Honda motors have a diversified product portfolio
- High brand awareness as it is one of the leading motorcycle and engine industries leading to a
- Holds a strong position in Asia’s motorcycle markets
On a Closing Note
Now that you have an idea of some of the best automobile shares in India, you can do some more research mapping to the ones presented here. However, be it the automobile sector or any other, it is highly recommended that investing in any kind of stocks should be followed by thorough research before investing. Also, patience is instrumental in the stock market during market volatility.