Driving In A Haze

Story By: Govind Singh
Thursday, October, 03 2013 - 11:09

It has not been the smoothest of rides for automobile companies and their investors this year. As industrial slowdown hits sales of commercial vehicles and stagnant incomes force people to defer car purchases, the sector is bracing itself for a long bumpy ride ahead.

This July marked ninth straight month of decline in car sales (down 7.4% year-on-year). Since January 1, the Bombay Stock Exchange, or BSE, Auto Index has fallen 13%. However, August brought some cheer, with companies reporting a 15.4% rise in car sales.

Market analysts say the industry is likely to remain under pressure till the current economic slowdown, compounded by high fuel prices and interest rates, persists.

On August 28, 10 out of 11 stocks in the BSE Auto Index were trading lower than their January 1 levels. Ashok Leyland was down 55% to Rs 12.10, followed by Bajaj Auto (19% to Rs 1,730), Maruti Suzuki (18% to Rs 1,236) and Mahindra & Mahindra (17% to Rs 777). Hero MotoCorp was the lone gainer (up 1% to Rs 1,913).

Besides the overall slowdown, there are other factors at work too. As Savitree Singh, senior equity research analyst, The Market, says, "Increase in fuel prices and import duties on commercial and sports utility vehicles are hitting sales." The Market gives advice on capital market instruments.


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