The Hindu Business Line : Positive monthly sales numbers lift auto stocks

Mumbai, May 2 Auto stocks outperformed the benchmark index on Friday, with the BSE Auto Index gaining 2.86 per cent against the BSE Sensex’s gain of 1.81 per cent. Among the Sensex stocks, Mahindra & Mahindra (2.98 per cent), Maruti Suzuki India (6.21 per cent) and Tata Motors (4.27 per cent) were among the best performing stocks. Other auto stocks that were up today include: TVS Motors (5.68 per cent), Ashok Leyland (4.50 per cent) and Escorts Ltd (7.43 per cent).

Monthly sales

Marketmen attributed their performance to the strong monthly sales reported by the auto companies on Thursday. Even though the country’s top carmaker, Maruti Suzuki, posted a net loss for the quarter ended March 31, it registered a 24 per cent growth in unit sales in April 2008 compared with April 2007 figures.

Bajaj Auto reported a 23 per cent growth in motorcycle sales during April 2008 at 2,03,930 units against 1,65,692 units during the same month of the previous year. TVS Motors posted a 5 per cent growth in its sales figures and Hero Honda recorded a 9 per cent jump in its unit sales.

“The duty cut in this year’s Budget seems to have impacted the automobile industry in a positive way. This is quite evident from the uptrend seen in the sales figures of both the car and two wheeler companies,” said an auto analyst with a brokerage.

Buying interest

Analysts also feel that with the recent market correction, the valuations of the scrips have become more attractive. “Shares such as Mahindra & Mahindra, Maruti Suzuki, Tata Motors and TVS are all available at a much lower price than what they were at the beginning of the year. This could be one of the reasons why there seems to renewed buying interest seen in the auto stocks,” said the head of research of a broking firm.

Mr Alex Mathew, Head-Research Centre, Geojit Financial Services Ltd, feels that crude has fallen below its exponential moving average due to a strong dollar and lower demand. “The outlook for crude is weak and the price of crude is expected to fall further, which also gave a boost to the auto sector stocks today,” added Mr Mathew.

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