Auto Stocks Outlook: Seen dn next wk on fear of rise in loan rates
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B. Karthick
Jun 7, 2008, 3:12:57 AM6/7/08
to Kences1
Auto Stocks Outlook: Seen dn next wk on fear of rise in loan rates
Fears of a possible hike in banks' cash reserve ratio which
continue to influence negative sentiments on automobile counters next
week.
The market expects the Reserve Bank of India to further hike CRR
in a bid to curb inflationary pressure.
India's headline inflation rate for week ended May 24 has soared
to a 45-month-high of 8.24% from 8.10% in the previous week.
The headline inflation is further expected to surge due to the
hike in
automobile and cooking fuel prices this week.
Government has time and again said it will take all steps to rein
in
inflation.
Reserve Bank of India Governor Y.V. Reddy Thursday said the
central bank accords highest emphasis to liquidity management.
Any hike in banks' CRR would squeeze liquidity in the system,
which would compound the automobile sector's miseries. Companies have
been witnessing dwindling sales in the wake of high loan rates and
tight credit norms.
"Rise in fuel prices is not an issue but the real threat is
interest rate.
Investors fear any further hike in interest rates would bleed
automobile
companies.
The government Wednesday raised petrol and diesel prices by 5
rupees per 1L and 3 rupees per 1L respectively.
Price of cooking gas was also increased by 50 rupees per cylinder
in a bid to reduce the losses of state-owned oil marketing companies
from selling petroleum products at subsidised rates.
Mahindra & Mahindra is expected to buck the negative trend on its
buyout of Italian motorcycle and scooter designer Engines Engineering
for an undisclosed amount.
The acquisition confirms that the utility vehicle company is
planning a foray in to the two-wheeler segment.
Reports also suggest that the company is developing small capacity
engines for smaller versions of its utility vehicles.
This is Mahindra & Mahindra's second acquisition in the current
financial year.
In April, a consortium of Mahindra & Mahindra and ICICI Venture
Funds Management Ltd. announced a 100% stake buy in Italian gear
manufacturer Metalcastello SpA.
We also expect some buying into Tata Motors on Land Rover-Jaguar
Chief Executive David Smith's statement that the two premium brands
expect a growth in sales with new launches.
Since the announcement of the acquisition, Tata Motors has been
under scrutiny from industry watchers who have been sceptical about
the Indian automaker's ability to turn around the Jaguar business,
which has been reportedly incurring losses for the past 20 years.
.
Following are this week's prices, in rupees, of key automobile
shares compared with previous week on National Stock Exchange:
.
Jun 6 May 30 Change (%)
.
Ashok Leyland 32.35 35.80 -9.63
Hero Honda 756.05 746.15 1.32
Mahindra & Mahindra 580.65 590.15 -1.60
Maruti Suzuki 750.00 763.05 -1.71
Tata Motors 540.20 575.70 -6.16
.
BSE Auto Index 4,227.32 4,355.76 -2.94
Nifty 4,627.80 4,870.10 -4.97
Sensex 15,572.18 16,415.57 -5.13
End
B.Karthick,
Research Analyst
Fears of a possible hike in banks' cash reserve ratio which
continue to influence negative sentiments on automobile counters next
week.
The market expects the Reserve Bank of India to further hike CRR
in a bid to curb inflationary pressure.
India's headline inflation rate for week ended May 24 has soared
to a 45-month-high of 8.24% from 8.10% in the previous week.
The headline inflation is further expected to surge due to the
hike in
automobile and cooking fuel prices this week.
Government has time and again said it will take all steps to rein
in
inflation.
Reserve Bank of India Governor Y.V. Reddy Thursday said the
central bank accords highest emphasis to liquidity management.
Any hike in banks' CRR would squeeze liquidity in the system,
which would compound the automobile sector's miseries. Companies have
been witnessing dwindling sales in the wake of high loan rates and
tight credit norms.
"Rise in fuel prices is not an issue but the real threat is
interest rate.
Investors fear any further hike in interest rates would bleed
automobile
companies.
The government Wednesday raised petrol and diesel prices by 5
rupees per 1L and 3 rupees per 1L respectively.
Price of cooking gas was also increased by 50 rupees per cylinder
in a bid to reduce the losses of state-owned oil marketing companies
from selling petroleum products at subsidised rates.
Mahindra & Mahindra is expected to buck the negative trend on its
buyout of Italian motorcycle and scooter designer Engines Engineering
for an undisclosed amount.
The acquisition confirms that the utility vehicle company is
planning a foray in to the two-wheeler segment.
Reports also suggest that the company is developing small capacity
engines for smaller versions of its utility vehicles.
This is Mahindra & Mahindra's second acquisition in the current
financial year.
In April, a consortium of Mahindra & Mahindra and ICICI Venture
Funds Management Ltd. announced a 100% stake buy in Italian gear
manufacturer Metalcastello SpA.
We also expect some buying into Tata Motors on Land Rover-Jaguar
Chief Executive David Smith's statement that the two premium brands
expect a growth in sales with new launches.
Since the announcement of the acquisition, Tata Motors has been
under scrutiny from industry watchers who have been sceptical about
the Indian automaker's ability to turn around the Jaguar business,
which has been reportedly incurring losses for the past 20 years.
.
Following are this week's prices, in rupees, of key automobile
shares compared with previous week on National Stock Exchange:
.
Jun 6 May 30 Change (%)
.
Ashok Leyland 32.35 35.80 -9.63
Hero Honda 756.05 746.15 1.32
Mahindra & Mahindra 580.65 590.15 -1.60
Maruti Suzuki 750.00 763.05 -1.71
Tata Motors 540.20 575.70 -6.16
.
BSE Auto Index 4,227.32 4,355.76 -2.94
Nifty 4,627.80 4,870.10 -4.97
Sensex 15,572.18 16,415.57 -5.13
End
B.Karthick,
Research Analyst
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