The automobile sales data for November indicated a mixed trend for the sector. At 10:46 am, the Nifty Auto index was up 0.3 percent at 10,791.05.

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Shares of Bajaj Auto and M&M were up 1 percent. Eicher Motors' shares gained 0.6 percent and Hero MotoCorp's stock was up 0.1 percent. However, Ashok Leyland's stock was the biggest drag on the Nifty Auto index and was down over 2 percent. Maruti Suzuki, TVS Motor and Tata Motors were in the red.

CNBC-TV18’s Sonia Shenoy noted that the sales numbers for November were a mixed bag. The commercial sector was the only growth pocket owing to a pick up in infrastructure activity while other segments like passenger vehicles, two-wheelers and tractors saw a 10-30 percent fall compared to last year, she explained.

Looking at the sales data for November, Eicher Motors' Royal Enfield reported better-than-expected sales, whereas sales for Hero MotoCorp, Mahindra & Mahindra, Tata Motors and Maruti Suzuki India were below estimates.

Meanwhile, Bajaj Auto's total sales were on expected lines but Ashok Leyland reported higher-than-expected numbers.

"Chip shortage issue is expected to ease further going ahead with better production levels for passenger vehicles in the coming months. Even as the production level may remain lower, the gradual easing of semi-conductor issue will provide some respite to passenger vehicle manufacturers," said Awanish Chandra, Head-Institutional Equities, SMIFS.

Maruti Suzuki said that the semiconductor shortage situation was improving and that the production has also gone up over the last few months.

The November production is seen at 82-83 percent against the 40 percent in September and 60 percent in October, said Shashank Srivastava, Senior Executive Director- Marketing & Sales, Maruti Suzuki, in an interview with CNBC-TV18.

For two-wheelers, sales momentum is subdued and demand for the upcoming months is looking weak and difficult to predict. Plus, the festival season was not as good as expected which has resulted in an inventory pile-up, said Chandra. Demand for commercial vehicles will continue to improve gradually whereas the tractor segment might continue witnessing a downward trend due to various rain-related factors and high base, he added.

According to Shenoy, the semi-conductor shortage, weak rural demand and unseasonal rains could pose to be serious issues for the automobile industry.

Some analysts have even pointed out that the current restrictions due to the new COVID strain and rising input costs might have an unfavourable impact on the demand scenario.

"The auto sector remains a mixed bag as of now, as lower-than-expected volume may result in weaker-than-expected margins," said Axis Securities while downgrading the sector to 'equal-weight' from 'over-weight'.

Some market participants believe that the recent correction in equities overall is an opportunity for investors to lap up automobile stocks.

Nirmal Bang Equities prefers M&M in passenger vehicles or tractors, Bajaj Auto and TVS Motor in two-wheelers and Ashok Leyland as a play on the impending commercial vehicle cycle recovery. The brokerage has maintained its relatively cautious stance on Maruti Suzuki, Hero MotoCorp, Eicher Motors and Tata Motors.

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