Investors, who had lost interest in auto stocks because of a sharp drop in demand post the November demonetisation, are warming up to the sector once again. The drop in sales volumes in the past two months has been less than what was feared. But clearly investors aren’t going to rush back to buy these stocks. An investor, for instance, is first likely to go for passenger car company stocks, followed by tractors and two-wheeler stocks, and in the end, trucks.

Currently, the top picks in auto space are Maruti Suzuki and Eicher Motors. The passenger car segment looks least impacted by the cash crunch given that the two biggest car makers Maruti and Hyundai have seen a volume decline of only 4 per cent year-on-year in December 2016. The two account for nearly 70 per cent of the total market. What restored confidence among investors was the fact that the drop in retail sales -when dealer sells vehicles to a customer -was restricted to only 5 per cent against an anticipated 15 per cent post demonetisation. India’s largest car maker Maruti, which had recorded a drop of 4 per cent in December, is picking up the pieces; even in the rural segment, Maruti grew more in December than what it did between April and November.