Auto stocks to continue slide - Integrated

Stocks of major automobile companies are seen continuing their slide in the week ahead, as the demand fundamentals for companies in the domestic market have not changed, and the rupee's fall against the US dollar stares at the automakers as an additional cost burden.

The rupee has depreciated around 8% against the US dollar since Jan 1, and the fall is expected to add to the indirect cost of original equipment manufacturers who import key components. However, major exporters such as Bajaj Auto are seen benefiting from the local currency's fall. Over the past week, Bajaj Auto's shares gained 3.7%, the most among major manufacturers. Bajaj Auto is the country's largest auto exporter, selling vehicles in 18 countries, apart from India.

Domestic vehicle sales are down on account of slowing economic growth, damp consumer sentiment, high interest rates and fuel costs. These factors do not look to be changing over the medium term, and are likely to keep the pressure on share prices of automobile companies.

Source : Equity Bulls

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