Moneycontrol » News » Markets » Analysis

Auto skids on rate hikes, crude oil shock

Published on Fri, Jun 27, 2008 at 12:26 | Source : Moneycontrol.com

Updated at Fri, Jun 27, 2008 at 13:09

Like this story, share it with millions of investors on M3

Share on Tumblr

Nifty

BSE | NSE 25/05/12

Are Mutual Funds betting on Nifty?

Auto stocks were hammered and beaten out of shape in today's trade. It was down about 4.5% in today's trade and was trading at level of 3707. Auto Index which made life high of 5881 level on Aug 2007 and now tading at 3894 levels loosing 33%.

All the front runner stocks like Tata Motors, Bajaj Auto, M&M, TVS Motors, Hero Honda, Maruti Suzuki were down any where between 7% to 4.5%.

Crude a major component for Auto industry is trading at life high of USD 140 per barrel. At this rate it is extremely discomforting for auto industry. Global auto majors are witnessing a selloff. General Motors crased 10% yesterday as Goldman Sachs advised selling the stock. Weakness is also seen in many of the Japanese auto majors todays trade.

On the other hand interest rate rise makes it expensive for auto finance company to offer loan at cheaper rate and for the consumers it will be difficult to acquire vehicle at rising prices. SBI India's largest public sector bank Hiked benchmark PLR by 50 bps to 12.75%. Union Bank also followed the same.

EMI's for 2-wheeler 3-wheeler & 4-wheeler will shoot up as majority of vehicles are sold on financing activities. With rise in PLR loans taken on floating rate will get costlier by 4-5%. It will impact sales of vehicles along with rise in input costs for auto vehicles as well. It does not get over here as crude prices are soaring & OPEC president expecting crude to touch 150-170 USD per barrel in the short term. It will further pressurise government to hike fuel prices. Hike in fuel price leads to hike in inflation which will force RBI to squeeze liquidity by rate hikes & ultimately leaving banks with no choice to raise PLR. So the journey for auto companies might not be so good in the near term.

Steel a major input for both auto and auto ancillary industry is facing serious pressure and prices of steel are going up along with prices of other raw material are soaring higher as inflation which is at 11.42 %. It will be extremely difficult for auto companies to maintain margins.

* List of Auto Stocks in BSE Auto Index (barring Bajaj Auto)

Scrip Name	Last Traded (Rs.)	Absolute Change (Rs.)	Change (%)	Prev Cl
TVS Motors	27.950	-2.200	-7.300	30.150
Mahindra & Mahindra	513.050	-39.600	-7.170	552.650
Tata Motors	457.900	-31.550	-6.450	489.450
Bajaj Auto	461.000	-28.250	-5.770	489.250
Hero Honda	678.500	-34.750	-4.870	713.250
Amtek Auto	238.350	-11.600	-4.640	249.950
Maruti Suzuki	646.000	-30.900	-4.560	676.900
Apollo Tyre	32.750	-1.150	-3.390	33.900
Cummins India	229.200	-7.350	-3.110	236.550
Ashok leyland	30.700	-0.900	-2.850	31.600
Exide Ind	65.600	-1.700	-2.530	67.300
MRF LTD	3477.000	-59.350	-1.680	3536.350
Bosch india	3730.500	-45.700	-1.210	3776.200
Escort Ltd	81.450	-0.650	-0.790	82.100
Bharat Forge	247.000	0.300	0.120	246.700