Auto Stocks Outlook for the week – 11 to 15.01.2016
(Further
correction in offing next week)
( www.rupeedesk.in )
Extending
the weak run, shares of major automakers are likely to see a
further
correction next week, with most counters, including Maruti
Suzuki
India Ltd, Hero Motocorp Ltd and Bajaj Motors Ltd, poised for a
further
fall.
There's
sharp correction on offer across all auto stocks. Expect them to
move
with the market, which is also likely to fall further.
Maruti
Suzuki is overvalued even at current levels. Some cooling off
was
always on the cards, with the larger market conditions now having
become
catalysts.
The
stock may see a lot of pain even as fears due to its correlation with
China
and some other markets mount. The company's subsidiary Jaguar
Land
Rover has significant exposure in the Chinese markets, with the
country
forming the second largest sales territory for JLR.
Hero
Motocorp has seen continuing weakness in sales due to a slowdown
in
the rural economy and growing competition from Honda Motorcycles
and
TVS Motor Co. In December, the company's sales fell 5% on year to
499,665
units, a third consecutive month of flat-to-declining sales for the
country's
largest two-wheeler maker.
A
rebound, if any, in the market will hinge on corporate earnings for the
December
quarter, this will be kicked off next week. Auto stocks will
also
take cues from monthly sales data to be announced by the Society of
Indian
Automobile Manufacturers. The industry body is likely to release
the
numbers in the early part of next week.
Most
auto companies, excluding two-wheeler makers, are expected to
churn
out positive numbers, aided by December sales and end-of-year
buying.