''In FY14, auto volumes in most sub-segments have been under pressure after an average FY13. 1QFY15 has, however, the marks of an early stage in demand recovery,'' according to Anand Rathi Research. ''Two-wheelers were the better performing sub-segment due to the lower base as well as persistent scooter demand. The lowered excise duty till 31 Dec'14 would help consolidate demand till the benefits of a virtuous cycle of economy recovery kick in (boosting industrial growth and consumer incomes),'' it added.

Anand Rathi, further said, ''Sector valuations normally suffer during periods of weak demand. Current valuations, however, are at a significant premium to past averages and appear to ignore the weak underlying demand (except in Tata Motors, where domestic demand is not a factor). Maruti Suzuki and M&M are quoting at significant premiums to fair valuations and we recommend Sells.''

''Tata Motors is our top pick on JLR persistent good performance, and we are positive on two-wheeler companies, Bajaj Auto and Hero MotoCorp. With better prospects for the CV segment, we upgrade Ashok Leyland and Eicher Motors to Buys, while we rate M&M a Hold. Of auto-component companies, we favour Motherson Sumi, Wabco India, Amara Raja Batteries, Balkrishna Industries and Suprajit Engineering,'' the broking firm added.

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