Auto Stocks Outlook
for the week – 27.06.2016 to 01.07.2016, To track broader market; Brexit
pressures loom
Stocks of major automobile companies are seen moving in line
with the broader market, with a
negative bias, based on expectations of continued selling
pressure due to foreign institutional
investors pulling out funds. The markets will keep an eye on
the fallout of the UK's exit from the
European Union, even as more countries begin demands for
such referendums, adding that the CNX
Auto Index may find it tough to remain above the 8500-point
mark for much longer. The index,
which closed down 0.1% yesterday on a weekly basis, shed
almost 3% in yesterday's trade, erasing
the week's gains.
What's more, the markets would also see added volatility on
account of the expiry of the June series
expiry on Thursday. Yesterday, Tata Motors led losses across
auto majors, falling nearly 8% in
intraday trade after the UK voted in favour of a 'Brexit'. The
company's shares may continue to see
selling pressure on weakness in European markets,
traditionally a stronghold for its subsidiary Jaguar
Land Rover.
Maruti Suzuki is facing its own battles, as with the
strengthening of the US dollar, raw material
exports will become more expensive. The company's stock,
which fell nearly 1% on a weekly basis.
Bajaj Auto, Hero MotoCorp, and Mahindra and Mahindra shares,
which defied the larger trend this
week, closing marginally higher, may continue to take their
cues from the advance of the southwest
monsoon, which made rapid strides this week. All three
companies are heavily dependant on the
monsoon, as a major portion of their sales come from rural
India, which has been in the grip of a
slowdown following two consecutive years of drought. Auto
companies' stocks would also track sales numbers for June, data for which is to be announced on
Friday.
