Why experts are trusting auto and finance stocks amid global uncertainty?

Post 5

Indian stock markets are facing their worst burnt, amid global uncertainty, inflation woes, rising bond yields, supply chain constraints, and rising interest rates in the US. The stock markets have tumbled in the past weeks and many see a further downside to the same. However, analysts are bullish on two sectors for investors to bet on – finance and automobiles. The finance sector has experienced a major correction while the auto index is outperforming the benchmark Nifty 50 index. Rising interest rates bode well for finance companies as their main source of income is the interest they earn on loans and advances. Borrowers are paying their dues on time, and the demand for loans is surging in the last two months, with the increase in federal rates. Moody’s report has predicted the banking sector to improve its fundamentals led by a decline in loan-loss provisions and increases in net interest margins. Meanwhile, the auto sector’s growth is expected to be fueled by Kharif output leading to an increase in tractor sales. The expected resolution of the chip shortage will also help top original equipment manufacturers (OEMs) to raise their production.

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