On a low base, there will be some upward momentum in overall auto space in the financial year 2020-21. So on a calendar year basis, the first quarter (Q1) might not see a lot of momentum but the uptick will start from the second half of the year, CRISIL said in a report.
An uptick in construction activity will provide support to metal prices in the next calendar year, it said.
Hetal Gandhi, director of CRISIL, said: “We believe on a low base, there is some upward momentum that we will see in fiscal 2021. So on a calendar year basis, while the Q1 might not see a lot of momentum but you will start seeing a pick up from the second half of the year in line with an uptick that we are expecting in construction activity and that will provide support to metal prices for the next calendar year,” she added.
“I believe that the demand recovery will be gradual. While there are certain issues that may get sorted – for example, the rural sentiment you may see upward to ...start happening somewhere around Q2 of the next calendar year, once incomes from rabi starts flowing into pockets of farmers, you may see better sentiment that would prevail in the rural markets."
"So you can see some kind of an uptick that will start happening especially in sectors like tractors as well as two-wheelers. However, on the urban side, we believe there is going to be a gradual recovery,” said Gandhi.
“Global steel prices have been under pressure and the Indian markets have followed suit. Almost a double-digit correction that we have seen in steel prices till date, we believe that there is also a moderation which has happened in the domestic demand given slower momentum that we have seen in construction activity in general and that is resulting into the overall demand scenario remaining at around 2-3 percent for fiscal 2020 as compared to a 7-8 percent growth that you have seen in the past two years,” she said.
Speaking on auto sector, she further added: “We do believe that the focus of the manufacturers is going to be on ensuring that the BS-IV inventory is liquidated and they are replacing all of that with BS-VI in Q1 of the calendar year. We also believe that there have been good uptick in terms of discounts which have been provided by manufacturers in the festive season as well as currently. That will also help them to liquidate that inventory.”