Wednesday, October 21, 2009

Sector View: Auto-Book Profit
This is one sector we gave buy on all major Auto stocks MARUTI, HEROHONDA, M&M and TATAMOTOR few stocks have given 300% return in one year. Now Auto sector faces multiple problems.
  • High raw material cost and high Crude prices will impact.
  • India's auto sales rose 17.1% in September from a year earlier to 212,975 vehicles, as holiday buying, easier credit and rising consumer confidence fueled growth in India's auto sector but going forward high base effect can have a negative impact on company performance.
  • Labor unrest in all major Auto and Auto ancillary Company Hyundai, MRF, HEROHONDA, M&M, JKTYRE, RICOAUTO and many more would impact this sector due to production loss and India which was considered as Major alternate production base for the Globe would suffer.HONDA MOTORCYCLES lost 4650 units in just one day of strike.
  • Indian Auto Companies benefited from weak Rupee as their export surged, now strong rupee and removal of benefit in EU would start to slow down exports.
  • Current surge in performance of Auto companies was on the back of Stimulus package, Election and Pay commission but after all this is factored into the prices, 22% lower monsoon may start showing its impact. 
  • Government to review Fuel prices in 15-20 days after Crude has touched $80/barrel. Festive season is over and any rise in petrol/diesel prices now may negatively impact the rising sales trend of auto comapnies.

Technically BSEAUTO Index Gained from Low of 2127 in December2008 to 6779 in October 2009 giving the best return in all sectoral INDEX and AUTO along with FMCG Index made all time new high in 2009 rally. Weakness is seen in this sector time to book profit when the going is good.



Exports by Indian small car producers such as MARUTI and HYUNDAI have started shrinking as scrappage schemes in various European markets are set to lapse by the end of the year. These big automakers saw their exports shoot up 35-40 % in the last few months on the back of incentives offered by Germany, France and the UK to help owners of older cars and vans buy new fuel-efficient vehicles, the Economic Times of India (ET) said. Germany, the biggest market in Europe, and Austria have already concluded their scrappage programmes and other countries are expected to wrap up their schemes by December. http://www.just-auto.com/article.aspx?id=101475


What is a Car Scrappage Scheme actually and how did it work? http://www.which.co.uk/advice/car-scrappage-scheme-explained/index.jsp




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