Maruti Suzuki, Tata Motors, M&M: Price hike puts auto stocks in fast lane

Equity markets bounced back on Tuesday, nursing losses of the past two days, on strong global cues. Amid broad-based buying, certain sectors were outperforming the markets on positive news flow. Nifty Auto index, for instance, gained 1.5 per cent on the National Stock Exchange (NSE) to hit an intra-day high of 10,113.5. Among individual stocks, Tata Motors jumped as much as 4 per cent on the NSE, followed by gains in Ashok Leyland, TVS Motors, Bajaj Auto, and Maruti Suzuki that gained between 1 per cent to 3 per cent.

On Monday, Maruti Suzuki increased the price for select models by up to Rs 34,000 to offset adverse impact of rising input costs. With this, India's largest car-maker joins the likes of Mahindra & Mahindra and Tata Motors who have already hiked prices owing to higher input costs. 

That said, the same uptick in input cost may hurt auto firms' Q3FY21 earnings, analysts say. According to a note by ICICI Securities, while topline performance of automobile companies is expected to be strong, margins may contract sequentially on the back of a sharp rise in key raw materials like metals, rubber and other crude derivatives. 

"We expect firms under our coverage universe (Ex-Tata Motors) to report topline growth of 15.9 per cent with EBITDA margins at 11.8 per cent (down 150 bps QoQ), and PAT growth of 17.8 per cent YoY. Including Tata Motors, coverage universe topline growth is seen 8 per cent YoY to Rs 1.65 trillion with corresponding margins at 11.6 per cent (down 140 bps QoQ) and PAT de-growth

of 10.7 per cent YoY to Rs 6,679 crore. OEM pack is seen leading the recovery," it said in an earnings preview report. 

So, how are auto stocks faring on technical charts? Take a look:

NIFTY AUTO INDEX: After the formation of "Inverse Head and Shoulder" pattern, the index experienced a tremendous bullish momentum, weekly chart suggests. This sentiment is still intact withy any correction looking as an opportunity to enter long positions. The overall trend is moving towards 11,000 with a support of 9,800 and 9,500 levels. While, the weekly Relative Strength Index (RSI) trades in an overbought condition, the index is not exhibiting extreme weakness. CLICK HERE FOR THE CHART
 
Maruti Suzuki India (MARUTI): The "Inverse Head and Shoulder" breakout indicates a medium-term rally towards Rs 9,500 levels. The trend is expected to stay bullish as long as the stock holds the support of Rs 7,000 levels. The immediate trend suggests a positive bias, till the scrip trades above Rs 7,500 levels, with likely near-term targets of Rs 8,300 to Rs 8,500 levels. CLICK HERE FOR THE CHART
 
Bajaj Auto Limited (BAJAJ-AUTO): This Bajaj Group firm is showing stability above the all-time high level of Rs 3,468, as per weekly chart. Moreover, the sentiment in the stock is bullish, with a rally expected seen in the direction of 4,000 levels. The overall trend should hold the upside bias till the support of Rs 3,400 is maintained on a closing basis. CLICK HERE FOR THE CHART
 
Mahindra & Mahindra Ltd (M&M): After crossing the resistance of Rs 770 levels, the stock is testing the support of the breakout. The support is placed at Rs 750, according to the daily chart. Any further upmove may take the stock towards Rs 850 and Rs 890 levels as the Moving Average Convergence Divergence (MACD) is not showing any weakness that can break the zero line. CLICK HERE FOR THE CHART
 
Tata Motors Ltd (TATAMOTORS): With a fabulous rally over the past week, this stock is attempting to conquere the next resistance range of Rs 280 to Rs 290 levels. On the downside, until the stock does not breach the support of Rs 240 levels on a closing basis, the upside bias is expected to stay strong. The medium-term trend is bullish with the stock expected to climb higher levels. CLICK HERE FOR THE CHART