Auto Stocks Outlook for the week – 04 to 08.04.2016
Seen
taking cues from RBI policy; rate cut eyed
( www.rupeedesk.in )
Stocks
of automobile companies are expected to take their cues from the monetary
policy to be
announced
on Tuesday, and may remain largely positive if the Reserve Bank of India cuts
repo rates
as
is being expected. The market is expecting the central bank to cut rates by 25
basis points, but hasn't ruled out a 50-bps cut either. A 25-bps interest rate
cut has already been factored in. Overall, we foresee a high likelihood of 25
bps rate cut by RBI in the forthcoming policy review. We do not rule out the
possibility of 50 bps cut as well, especially when the US Fed has turned
dovish.
The
outlook on the carmaker remains positive, even as the Maruti Company is seen
losing some
market
share in light of tough competition. The company commands 52% market share in
the
passenger
car market. This is seen coming down to and consolidating at 48% over the next
couple of
years.
Sentiment on Hero Motocorp remains bullish, as the government begins execution
of steps to
bolster
the rural economy, which has been hit hard following two consecutive years of
drought. Tata
Motors
out-performed the auto space, but surprisingly this move wasn't supported by
meaningful
longs.
Eicher Motors, the newest addition to the Nifty 50 will see another strong week
of trading,
especially
given that the company crossed 50,000 units sales in March -- a big milestone
for the
motorcycle maker.