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Two-Wheeler Shares Surge Post-Budget 2024 With Focus On Rural Demand
Hero MotoCorp, Eicher Motors, TVS Motor Company, and Bajaj Auto saw their share prices rise by up to 3% following the Budget 2024 announcements. Hero MotoCorp led the gains and was among the top performers in the Nifty-50 stocks. The budget's focus on rural growth is expected to boost rural two-wheeler demand significantly.
The two-wheeler industry is anticipated to maintain a steady volume growth rate. CareEdge Ratings projected a growth of around 7-9% for FY25, building on the strong 9.8% growth seen in FY24. This growth is expected to be driven by higher Electric Vehicle (EV) sales supported by the Electric Mobility Promotion Scheme 2024.
Expected Growth in Two-Wheeler Industry
Hero MotoCorp, with its extensive entry-level portfolio, stands to benefit the most from this rural demand boost. The recovery in exports from FY24's low base and favourable monsoon conditions are also likely to improve rural consumer sentiment and income levels, further supporting growth.
Arun Agarwal, VP-Fundamental Research at Kotak Securities, stated that domestic two-wheeler industry volumes are expected to witness a 7-8% CAGR over FY24-27. Additionally, Motilal Oswal Financial Services reported an 11% year-on-year growth in combined two-wheeler volumes for Q1FY25.
Impact of Budget Announcements
The budget's announcements directed at rural growth are crucial for increasing two-wheeler volumes. Income tax relief for the lower middle class is also seen as positive for entry-level two-wheeler segment growth. However, news of a rise in long and short-term capital gains tax led to market corrections.
The Nifty-50 index and Sensex both corrected by more than 1%, causing Hero MotoCorp, Eicher Motors, TVS Motor Company, and Bajaj Auto share prices to give up a significant portion of their gains.
Analysts' Perspectives
Other analysts remain optimistic about the industry's future. They expect interest rate cuts in the second half of FY25 and strong demand for new model launches to drive further growth. The overall sentiment remains positive despite recent market corrections.
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