Rakesh Jhunjhunwala is Bullish on this Auto Stock, Buys 1.4% Stake

After the pandemic, the Indian economy started to accelerate, led by the auto sector.

Auto stocks are rising and most of the automobile companies are reporting good sales.

The bullishness on Dalal Street on the sector is due to the recent increase in auto sales. The emphasis of the Indian auto sector on electric vehicles (EV) has also caught the attention to foreign investors.

India's top EV stocks are set for sky high returns.

It seems that the top investing gurus of India have also turned bullish on the sector.

One of the ace investors of India, Rakesh Jhunjhunwala recently bought stake in a tractor-making company Escorts Kubota.

According to Escorts Kubota's shareholding pattern, from April to June 2022, Rakesh Jhunjhunwala bought 1,830,388 shares, or 1.39% stake of the company.

In the company's shareholding pattern for the January to March 2022 quarter, his name was missing from the list of individual shareholders.

This means that Rakesh Jhunjhunwala purchased fresh shares between April to June 2022.

Let's find out why...

A word about Rakesh Jhunjhunwala

Rakesh Jhunjhunwala is an Indian billionaire stock trader and investor.

He manages his own portfolio as a partner in his asset management firm, Rare Enterprises. He invests in both his own and his wife's name, Rekha Jhunjhunwala. He holds the designation of Chartered Accountant.

Rakesh Jhunjhunwala is known as "India's Warren Buffett."

According to Forbes, Jhunjhunwala is the 36th richest man in the country. He owns 33 publicly traded stocks worth more than Rs 272 bn.

He is a director on the boards of several companies, including Viceroy Hotels, Concord Biotech, Provogue India, and Geojit Financial Services.

Why Did Rakesh Jhunjhunwala Buy into Escorts Kubota?

Rakesh Jhunjhunwala, India's big bull, has added Escorts Kubota to his portfolio once again. The billionaire investor currently owns 1.39% stake.

He has been investing in Escorts for several years now. It's just that his stake in the company had dropped below 1% in the March 2022 quarter.

While we don't know for certain why the 'Big Bull' is bullish on this auto stock, there are some explanations.

The Nifty Auto index recently surged to its lifetime high of 12,660 level, which is more than a 23% growth in one year.

It seems like auto stocks are regaining their glory.

The reason for this has been weak metal prices, falling oil prices, a new electric vehicles policy by the government, and seasonal demand of products.

Crude oil prices are falling, and metal prices have also fallen.

Crude oil prices and auto stocks are inversely related. A reduction in the price of crude oil reduces the cost of operating automobiles, which results in an increase in demand.

A fall in metal prices reduces the companies' cost of raw materials which bodes well for their profitability.

Meanwhile, the government of India has announced a policy for EVs (electric vehicles). This policy introduced a battery swapping plan to accelerate the EV adoption. This news has also been a positive trigger for auto stocks.

With respect to demand, due to an early monsoon, sales numbers of automobiles are set to grow. This too been one of the factors for the rise in auto stocks.

So, as you can see, the entire sector's outlook has improved once again and Rakesh Jhunjhunwala may have bought into this fundamentally strong stock owing to these reasons.

Also, here a little backstory worth mentioning about Escorts Kubota.

A deal was announced by a Japanese tractor manufacturing company, Kubota Corporation, to invest Rs 94 bn in India's fourth largest tractor manufacturing company, Escorts, in November 2021.

The transaction was completed in June 2022, and the merged entity is known as Escorts Kubota Limited.

Well, since that deal, in the last one month the share price of Escorts has increased by more than 12%.

Moreover, the industry estimates the tractor market to grow 4-6% in the ongoing financial year 2023.

Demand for construction equipment is expected to rise in high double digits as a result of government spending on infrastructure projects, particularly in rural areas.

It appears these reasons seemed compelling enough for Rakesh Jhunjhunwala as he bought stake in the most recent quarter.

The markets have also factored all this as shares of the company currently trade near their 52-week high level.

To know more, check out Escorts 2021-22 annual report analysis.

Also check out Escorts news and analysis.

About Escorts Kubota

Escorts is a multinational conglomerate based in India that manufactures agricultural machinery, construction machinery, material handling equipment, and railway equipment.

The company was founded in 1944 and currently has marketing operations in over 40 countries.

Recently, the company's name was changed to Escorts Kubota after the acquisition by the Japanese company Kubota Corporation.

To know more about the company, see the Escorts Limited Company Fact Sheet and Escorts News and Analysis.

Since smallcaps interest you, take a look at the approach to investing in small-cap stocks and the top 4 smallcap growth stocks in India.

You can also compare Escorts with its peers:

Escorts vs HMT

Escorts vs VST Tillers

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...