After being a multi-bagger in the 2014 rally, the TVS Motor stock has been on a downtrend since it touched its one-year high of ₹332 in mid-January this year.

The stock lost 6 per cent in the last one week. The immediate trigger could have been the relatively lower growth in volumes in March 2015, numbers of which were released during the week. Compared with the double-digit growth recorded in many preceding months, the company’s two-wheeler sales in March grew only 7 per cent over the year-ago period.

Besides, the correction in the last two-three months is also in the light of slowing rural demand. Lower minimum support prices for crops, the plunge in global farm product prices and unseasonal rains have reduced disposable incomes in the hands of the rural consumers, who constitute a chunk of the market for companies such as Hero MotoCorp and TVS Motors.

Third, though the company has seen good growth in earnings, posting about 38 per cent growth in profits in the nine months ended December 2014, the rally has catapulted valuations beyond the comfort zone.

The stock now trades at 39 times its trailing 12-month earnings, much higher than bigger players such as Hero MotoCorp and Bajaj Auto, which trade at 20-21 times their trailing earnings. So it may be time for correction in the stock.

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