Auto Stocks Outlook: Dn next wk on inflation, interest rate worry

[B. Karthick]

Auto Stocks Outlook: Dn next wk on inflation, interest rate worry
Saturday, Jun 28

Frontline automobile shares are likely to slide further next week
as concerns over higher inflation, and interest rates may keep
investors wary.
India's headline inflation rate rose to 11.42% for the week ended
Jun 14 from 11.05% the previous week. This is the highest inflation
rate since the new wholesale price index series was introduced in
1994.
Concerns over economic and corporate growth also persist with oil
prices skyrocketing. Crude oil hit an all-time high of $143 a barrel
on New York Mercantile Exchange Friday.
Apart from the challenges posed by the macro environment, price
hikes in essential raw materials like steel is also making it
difficult for auto makers to maintain operating margins.
The rising interest rates are impacting demand. Also, the rise in
input costs are forcing auto companies to raise product prices, which
in turn is impacting demand.
Poddar expects the auto industry to register a sales de-growth in
2008-09, with poor financial performances from most auto majors.
However, he is positive on Hero Honda Motors and Maruti Suzuki India.
However, it has maintained a buy recommendation on the stock.
The company had earlier planned to launch utility vehicle model
Ingenio in January. However, the model is likely to be rolled out
later this year.
We believe that the macro environment continues to remain
challenging and current valuations factor in the near-term positives.
Maruti Suzuki is likely to move within 630-740 rupees next week,
while Hero Honda Motors is seen moving in a range of 645-780 rupees.
.
Following are this week's prices, in rupees, of key automobile
shares, compared with the previous week, on National Stock Exchange:

Jun 27 Jun 20 Change (%)

Ashok Leyland 29.80 32.35 -7.88
Bajaj Auto 453.95 512.10 -11.36
Hero Honda 682.90 758.30 -9.94
Mahindra & Mahindra 512.55 574.20 -10.74
Maruti Suzuki 642.75 728.35 -11.75
Tata Motors 444.35 489.65 -9.25
.
BSE Auto Index 3,689.92 4,042.86 -8.73
Nifty 4,136.65 4,347.55 -4.85
Sensex 13,802.22 14,571.29 -5.28
End

B.Karthick,
Research Analyst.