Amara Raja, Ashok Leyland hit 52-week low; Maruti Suzuki, TVS Motor down 4%

Shares of automobile companies are trading lower with Nifty Auto index and S&P BSE Auto index falling 4.5% in past three days as the auto companies delivered a subdued volume performance in November 2018 and concerns of muted outlook.

At 10:59 am; Nifty Auto (8,839) and the S&P BSE Auto (19,937) were down 1.7% each, as compared to 1% decline in the benchmark indices Nifty 50 and the S&P BSE Sensex.

Amara Raja Batteries, Ashok Leyland, Balkrishna Industries, Bharat Forge and Force Motors have hit their respective 52-week lows on the BSE. TVS Motor Company, Maruti Suzuki India, Balkrishna Industries, Apollo Tyres, Bharat Forge, Eicher Motors, Ashok Leyland and Tata Motors were down in the range of 1% to 4% today.

Maruti Suzuki India has fallen 4% to Rs 7,281, extending its 2% decline on Wednesday, after the company said it will hike its car prices from next month to offset the adverse impact of an increase in commodity prices and foreign exchange rates.

“The cost of its vehicles has been impacted adversely due to increase in commodity prices and foreign exchange rates, etc. Hence, it has become imperative for the Company to pass on some impact of the above additional cost to customers through a price increase across various models in January 2019,” Maruti Suzuki said in a press release.

Tata Motors was trading 2% lower at Rs 166, falling 6% in past two trading sessions, after S&P Global Ratings on Tuesday lowered the credit rating of automaker and its luxury car unit Jaguar Land Rover Automotive Plc (JLR), citing weaker-than-expected profitability at JLR.

Meanwhile, the passenger vehicle (PV) segment recorded broadly a flat volume growth, while the medium and heavy commercial vehicle (M&HCV) segment witnessed its first double-digit fall in November, after a long period.

“Recently the automobile industry has been facing challenges in terms of higher fuel price, additional burden of new insurance policy and constraints on loan disbursement from financial institution amid new policy. These near- term hurdles started taking toll on CV sales in past 1-2 months. This gets reflected in weaker wholesale numbers for Nov’18. Overall retail sales remained muted across segments during recent festive period,” analysts at Reliance Securities said in a note.

Going forward in FY19, CARE Ratings expects the auto industry to continue to witness healthy demand as the disruptions caused by various policy implementations (demonetization, ban on BS-III vehicles, GST, rate revisions for) have almost moderated. Also, demand is expected to improve especially for tractors and commercial vehicles on the back of various initiatives taken by the government in the Union Budget 2019 for the Agriculture and Infrastructure sectors.

Rising crude oil and commodity prices especially petrol and diesel and frequent policy changes continue to remain key concerns for the growth of the industry. If crude oil prices remain stable in the range of less than $ 70/barrel, this risk will reduce, the rating agency said in sector update.