Investors Eye Nifty Auto (NIFTYAUTO) vs Nifty Metal (NIFTYMETAL): Which Sector Offers Better Returns?

• The Indian stock market has been highly volatile in May, influenced by the upcoming Lok Sabha election results.
• Despite the volatility, experts predict strong gains if Modi wins, driven by heavyweights and broader indices.
• Noteworthy detail: The benchmark Nifty hit a new peak of 23,000 for the first time ever before correcting again.

Discover the latest insights into the Indian stock market’s volatility and potential gains amidst the Lok Sabha election results.

Market Volatility and Election Results

The Indian stock market has experienced significant fluctuations in May, largely due to the anticipation of the Lok Sabha election results. The benchmark Nifty index, which initially dropped by over 3 percent in the first half of the month, managed to recover and hit a new peak of 23,000 for the first time. However, it has since corrected again, influenced by weak global trends and rising US bond yields.

Expert Predictions on Market Trends

Financial experts anticipate that the market will continue to be volatile until the election results are announced. They predict strong gains if Modi wins, driven by heavyweights across all sectors and broader indices. The election results and the upcoming Budget are expected to be key triggers for the market’s future performance.

Nifty Auto vs. Nifty Metal: Investment Opportunities

Both Nifty Auto and Nifty Metal have outperformed the benchmark Nifty in 2024 YTD. Nifty Auto has gained almost 28 percent, while Nifty Metal has grown over 23 percent, compared to a 4.5 percent rise in the Nifty during the same period.

Performance Analysis

In the last year, both indices have shown a similar trend, outperforming the benchmark. Nifty Auto has rallied 67 percent, while Nifty Metal surged over 64 percent. In comparison, the benchmark Nifty rose 22 percent during this time. In 2024 YTD, Nifty Auto has given positive returns in all five months, whereas Nifty Metal has been in the green for three of the five months.

Constituents’ Performance

In 2024 YTD, all Nifty Auto constituents, except MRF, have been in the green. Exide Industries gained the most at 59.5 percent, followed by M&M, Samvardhana Motherson, and Bosch, each up over 40 percent. Other notable performers include Bajaj Auto, Hero Moto, Ashok Leyland, Tata Motors DVR, Tata Motors, and Balkrishna Industries, which jumped between 20 percent and 34 percent each. Conversely, MRF lost a little over 1 percent this year.

In the Nifty Metal index, all constituents, except Ratnamani Metals Tubes, were positive in 2024 YTD. Hind Zinc was the top performer with a 124 percent rally, followed by Vedanta, which surged 76 percent. Other significant gainers included NALCO, JSPL, Hind Copper, SAIL, Tata Steel, Jindal Stainless, and NMDC, each advancing between 24 percent and 48 percent. However, Ratnamani shed 3.5 percent this year.

Long-term Investment Prospects

Experts have varying opinions on which index offers better long-term investment opportunities. Deepak Jasani, Head of Retail Research at HDFC Securities, prefers the auto sector over metals, citing the cyclical nature of the metals sector and the growth potential of the automobile sector in India. Similarly, Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, and Vikram Kasat, Head of Advisory at Prabhudas Lilladher, also favor the auto sector for long-term investments.

Conclusion

In conclusion, while both Nifty Auto and Nifty Metal have shown impressive performances in 2024 YTD, the auto sector seems to have a stronger long-term growth potential. Factors such as the burgeoning middle class in India, increasing consumer preference for electric vehicles, and affordable mobility solutions contribute to this positive outlook. Investors are advised to consider these insights and consult with certified experts before making any investment decisions.