RBI Monetary Policy: Why experts are bullish on small-cap auto stocks after RBI’s rate cut?

Stock Market Today: The reduction repo rate improves the working capital availability for Auto companies. Also while larger Auto makers were still managing situation, small cap auto stocks and vendors of Auto OEMs were at a receiving end.

The companies as JBM Auto, Rico Auto Industries, Fiem Industries and Samvardhana Motherson International Ltd are among some picks of the experts

Analysts View on Auto stocks post RBI Rate cut

The 25 bps RBI rate cut will ease the working capital challenges for rate-sensitive segments. However, when it comes to the auto segment, there are a lot of vendor companies whose working capital got squeezed due to the delay in payments from the big companies that outsource their work to such small companies, said Avinash Gorakshkar, Head of Research at Profitmart Securities. Now, the big companies will start releasing their payments, and at the same time, their liabilities to the banks will come down. So, small-sized auto vendors are expected to come under the bulls' radar, and hence, I would suggest investors look at small auto companies to maximise one's gains in the wake of RBI's rate cut after a gap of nearly five years, added Gorakshkar.

For those who want to add auto stocks after the RBI Monetary Policy meeting, Avinash Gorakshkar, Head of Research at Profitmart Securities has suggested looking at listed vendor companies like JBM Auto, Rico Auto, Fiem Industries, etc.

Anshul Jain, Head of Research at Lakshmishree Investment and Securities, said that Small-cap and mid-cap stocks are under immense selling pressure, and aggressive investors can easily find discounted stocks in this segment. Those looking at small-cap or mid-cap auto stocks can look at Samvardhan Motherson shares for the short term. However, those who believe in safe bets can consider Maruti Suzuki shares for the short to medium-term, added Jain

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.