Auto Stocks Outlook: Seen down next week despite excise duty cut

[K.Karthik Raja]

Auto Stocks Outlook: Seen down next week despite excise duty cut

CHENNAI - Automobile shares are seen down next week tracking the
broad market, despite the cut in excise duty announced in Union Budget
for 2008-09 (Apr-Mar),Fundamental analyst B.KARTHICK(Junior) said.
"Although duty cut should have heralded good news for the
automobile sector, a weak broad market would pull down all stocks
notwithstanding sectors," a chennai-based fundamental analyst
Mr.N.SUKUMAR said.
Finance Minister P. Chidambaram has lowered excise duty on two and
three-wheelers, small cars, and bus chassis to 12% from 16%, and on
hybrid cars to 14% from 25%.
Automobile sales are expected to pick up as many customers had
deferred buying vehicles ahead of the Budget on hope prices may fall
later in case some sops are offered.
Fundamental Analyst Miss.LAKSHMI JOTHI said though the finance
minister did not disappoint any sector in the Budget, it had little
for the stock market.
"A hike in short-term capital gains tax to 15% from 10% and
treatment of Securities Transaction Tax like any other deductible
expenditure against business income has seen traders going into the
sell mode," the Chennai-based analyst said.

Weak global sentiment has added to the weakness in local market.
Fears of the U.S. economy slipping into a recession has resulted
in share markets across Asia and Europe declining.
Even Wholesale Price Index-based inflation rate has breached the
5% mark, for the first time in 10 months, to 5.02% for week the to Feb
23, up from 4.89% in the previous week.
The market is in a correction mode, so investors would sell off
positions even with slight gains," the Chennai-based analyst said.
The actual impact of the excise duty cut would be felt after 2-3
months.
"There has been an inventory pile-up as sales in February have
been down on Budget expectations. It will take two-three months to
clear the inventory," the chennai based analyst said.
We have maintained 'buy' Suggestions on Maruti Suzuki, Mahindra &
Mahindra, Tata Motors, and Hero Honda on their vehicle sales gaining
momentum.
.
Following are this week's prices, in rupees, of key automobile
shares
compared with previous week on National Stock Exchange:
.
Mar 7 Feb 29 Change (%)
.
Ashok Leyland 35.20 37.45 - 6.00
Bajaj Auto 1,888.10 2,281.95 -17.25
Hero Honda 766.65 761.65 0.65
Mahindra & Mahindra 667.25 691.75 - 3.54
Maruti Suzuki 927.85 868.20 6.87
Tata Motors 671.80 700.35 - 4.07
.
BSE Auto Index 4634.70 4887.17 - 5.16
Nifty 4771.60 5223.50 - 8.65
Sensex 15975.52 17578.72 - 9.12

K.Karthik Raja
www.kences1.blogspot.com