On Thursday, it was auto stocks that led the market’s decline. Why is this worth taking note of? Because auto stocks, especially those that make HCVs and LCVs, give an early indication of how things are panning out in the economy. The reason is simple. When goods are produced, they have to be transported. So, the more the goods, the greater the need to transport them – pushing sales of HCV/LCVs. Now, look at the composition of the Nifty and Sensex. Does it give a real picture of the economy? IT and financial services dominate the weightages. IT is more representative of what is happening in the US economy. And financial services, though an important part of the economy, is still a lagging indicator rather than a leading indicator. Which then is the index one should look at to figure out what is happening on the ground? No, it is not an auto index. It is something else.
