GOLDEN RULES FOR TRADING

Auto Stocks Outlook for the week -01 to 05.08.2016 (To take cues from July sales data, companies earnings)

Auto Stocks Outlook for the week -01 to 05.08.2016
(To take cues from July sales data, companies earnings)

Next week, automobile stocks are expected to take cues from sales data for July, expected to be
announced on Monday. The bias for most auto stocks remains positive on account of the steady
progress of the monsoon, as well as hope of a revival in demand in rural regions.

The CNX Auto Index, which closed up nearly 2% this week, is likely to cross the 9500-point mark and may well test 9650 points, given the encouraging earnings announced by Maruti Suzuki and Eicher Motors. Maruti Suzuki is expected to record further gains, even as the company ramps up production to make up for the shortfall in June, which resulted from a maintenance-related plant shutdown. The company's shares, which gained as much as 8% this week, will see brisk trading, given that most brokerage houses have raised the target price on the stock.

Shares of the country's largest passenger carmaker by volumes may test 5,000 rupees in the coming
weeks, if it manages to break past the crucial resistance point of 4,850 rupees. Maruti Suzuki is
improving its competitive positioning and has long-term strengths. Maruti Suzuki's strong product
portfolio and distribution network makes it best placed to capture pent-up demand in the passenger
vehicles segment. We ascribe a 'buy' recommendation on the stock, with a target price of 5,095 rupees.

Besides, the market will also be bullish on stocks of two-wheeler makers, considering an expected
turnaround in rural demand. Hero MotoCorp, which fell 1.8% this week, may see an upswing,
assuming the company's sales numbers for July are in line with expectations. Mahindra & Mahindra
has been trading within a range of 1,400-1,490 rupees, and will see resistance at the higher end of this
band.