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The Reserve Bank of India's Third Quarter Review of Monetary Policy on Tuesday will set the direction for the market next week, and shares of the interest rate sensitive automobile sector are seen tracking the broad trend in equities in the coming week. The most respondents expect the central bank to lower the Repo Rate at which it lends to banks under the liquidity adjustment facility by 25 basis points at its policy review, with very few hopeful of an accompanying cut in banks' Cash Reserve ratio. A chunk of India's automobile sales are made through loans, and elevated interest rates have contributed to the weak volumes being witnessed through the year. Earlier this month, the automobile industry body cut passenger cars sales growth forecast to 0-1% in 2012-13 (Apr-Mar) from 1-3% forecast earlier, and that of commercial vehicles to 0-2% from 3-5%. Sales of two-wheelers are seen growing 3-5% from 5-7%.
Investors will also eye automakers' Oct-Dec earnings, with TVS Motors slated to
announce its results on Feb 1. We expect a mixed Q3 for auto manufacturers with
sales/PAT growth of 10%/8% and flat margins YoY (+60bps QoQ).
