Overall, May-15 volumes indicated strong recovery in MHCVs, steady growth in passenger vehicles and some weakness in 2-wheeler and tractors. Industry volumes across all segments are largely in line with our expectations, says Nomura Financial Advisory and Securities in its report.

As per our calculations, MHCV industry volumes increased by 25% y-y; all three big OEMs have seen strong double-digit volume growth. Passenger vehicle industry volumes increased by 7% y-y; MSIL's volumes increased by 13% while rest of the industry volumes grew at only 1%. In 2-wheelers, industry volumes are down 1%; HMSI’s volumes are up 3% on strong growth in scooters while HMCL's volumes were down 5% and BJAUT’s volumes were down ~4%. In the tractors segment, M&M reported 20% y-y decline while Escorts’ volumes were down 16%.

The government has downgraded this year's monsoon forecast to 88% of long-term average rainfall from 93% earlier. "This does not augur well for rural focussed segments like 2-wheelers and tractors. We expect volumes in both these segments to remain weak in 1HFY16," opined Nomura.  

"Overall, we continue to prefer the four-wheeler OEMs- Maruti Suzuki (MSIL IN, Buy), Tata Motors (TTMT IN, Buy) and Ashok Leyland (AL, IN) as we expect volume growth recovery to be much stronger going ahead. Strong demand should also help them pull back on discounting and benefit from operating leverage; this, coupled with benign commodity prices, should lead to a sharp margin recovery in FY16F, in our view," it added.

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