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Short covering in auto space should continue ahead of Budget

ICICIdirect Research 19 Jan 2022 DISCLAIMER

Commentary

For a major part of the January series, auto & auto ancillary stocks have shown resilience and performed better in terms of price action. Major auto stocks rallied on the back of short covering as there was an expectation that government infra spending would be higher, which should trigger some buying demand for auto.

Major stock OI activity (change):

Outlook:

We remain positive on the auto space as in the last one month we saw closure in short open interest of Ashok Leyland, Tata Motors, Eicher Motors, Hero MotoCorp and Maruti, which managed to revert from their major supports. Stock like M&M moved higher on the back of fresh long accumulations while a similar trend was observed in Apollo Tyre as well. Most stocks have managed to surpass their sizeable Call base for the January series. This has forced Call writers to move higher thereby creating headroom for more upsides. Delivery based buying in most stocks confirms the strength of the ongoing momentum. Hence, we feel auto stocks would be in focus in the second half of the January series where the ongoing momentum is likely to continue.


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