The automobile sector is cyclical and dependent on the growth of the economy and improvement in infrastructure. Factors like increased public spending favorable interest rates and general improvement in per capita income point towards higher demand for automobiles in the future. Also governments initiatives in the infrastructure sector such as the Golden Quadrilateral project and NHDP National Highway Development Programme are likely to give boost to four-wheeler sales especially CVs.
The fortunes of the auto ancillary sector are closely linked to those of the auto sector. Demand swings in any of the segments cars two-wheelers commercial vehicles have an impact on auto ancillary demand. Demand is derived from original equipment manufacturers OEM as well as the replacement marketauto ancillary manufacturers are bright from the long-term perspective. But identifying the right stock from this sector becomes difficult on account of technical complexities involved and higher nature of fragmentation of the industry.
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