• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Namrata Gada
Mayur N Shah

`Higher raw material costs affect margins'

Mumbai June 4 The month of May, a lean month for sales in the domestic two- and four-wheeler market, has not only affected sales but has had a cascading effect in stock prices amidst top auto players in the market too.

The BSE Auto index plunged 1.63 per cent or 81.63 points to close at 4,948.37 points on Monday. Of the total 20 stocks in the index, 16 declined while only four stocks advanced.

Leading two-wheeler manufacturers such as Hero Honda, Bajaj Auto and TVS Motor Company had sales drop in May by 6 per cent, 15 per cent and 13.3 per cent respectively; their stock prices fell on Monday by 0.61 per cent, 0.71 per cent and 4.12 per cent correspondingly.

Analysts said the two-wheeler segment was expected to continue its underperformance for the next three-four months on account of high interest rates biting this segment.

"The two-wheeler sales numbers continue to drag. Also, the second quarter is affected by monsoons coupled with the high interest rates, the two-wheeler sales are unlikely to pick up," said an auto analyst.

"The higher raw material costs putting a pressure on the margins and the topline and will lead to the de-growth in volumes of two-wheeler companies," said Ms Vaishali Jajoo, auto analyst, Angel Broking.

Betting on festive season

Analysts said a turnaround in the sales numbers may only come in the festive season. "We may see better performance after the first half of the year," said Mr Huzaifa Suratwala, auto analyst, Emkay Share and Stock Brokers Ltd. However, analysts do not expect a growth of more than of 10-12 per cent overall in comparison to the 24 per cent market growth that was reported last year.

In the four-wheeler segment, though companies such as Maruti and Mahindra & Mahindra posted a rise in May sales, their stock prices fell by 0.55 per cent and 1.48 per cent respectively.

"The sales numbers of Maruti Udyog were in line with our expectations while Mahindra and Mahindra posted better numbers than expected and the new launches of these companies are expected to perform better till there is new competition from the market," said Ms Jajoo.

Tata Motors, the largest commercial vehicle manufacturer posted a decline in sales by 4 per cent; its stock price fell on Monday by 4.78 per cent the highest in the `Auto Index' of the Bombay Stock Exchange for that particular day.

"The growth in Tata Motors looks subdued as they face competition from new models launched by Maruti and Mahindra and Mahindra that are performing well. Also, the high base effect last year has led to a slowdown in growth this year," said Ms Jajoo.

More Stories on : Automobiles | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`Gonu' ramps up into super cyclone status

Copyright © 2007, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line