Maruti, Tata Motors: How to trade auto stocks in the run-up to RBI policy?

While industry executives feel that there will be no shortfall in consumer demand in the near future, most are wary of the near-term challenges

Auto sales were in top gear in July with passenger vehicle volumes improving on the back of a healthy order book and an uptick in enquiries and bookings in urban and rural areas. India's largest car-maker, Maruti Suzuki, for instance, rerported total sales of 162,462 units in July 2021 as against 108,064 units during the same period last year. READ ABOUT IT HERE

So how should you trade auto stocks? Is the worst over or can the upcoming monetary policy review by the Reserve Bank of India (RBI) later this week dent the sentiment? Here's what charts say.
 

NIFTY AUTO INDEX
Likely target:  10,493 (upon crossing 50-DMA)
Upside potential:  2.65%

The formation of “Double Top”  has dismantled the upside bias, as per the daily chart. The immediate resistance comes in at 100-days moving average (DMA) followed by 50-DMA, placed at 10,222 and 10,493 levels, respectively. The support comes in at 200-DMA, which is currently located at 9784 levels. Only upon conquering 100-DMA, the index may see a rally towards the 50-DMA. The Relative Strength Index (RSI) has risen up from the oversold territory, which indicates an upward bias. CLICK HERE FOR THE CHART

Bajaj Auto Limited (BAJAJ-AUTO)
Likely target:  Rs 4,090 (after crossing 100-DMA)
Upside potential:  4%

The Gap-down has resulted in a negative trend that breached the support of 50-DMA and 100-DMA. The next support comes  in at 200-DMA, currently placed at Rs 3,695 levels. The immediate resistance of Rs 3,920, which is its 100-DMA, needs to be conquered for the stock to rally towards Rs 4,090 levels, which also is its 50-DMA. The overall trend will remain positive until the counter upholds the support of 200-DMA. CLICK HERE FOR THE CHART
 
Maruti Suzuki India (MARUTI)
Likely target:  Rs 6,600 (only after breaking Rs 6,800 levels)
Downside potential:  -3%

After breaching 200-DMA near Rs 7,200 levels, the counter is indicating a negative sentiment. This down move may pick up pace if the support of Rs 6,800 gets breached. If that happens, the counter may slide towards Rs 6,600 levels. On the flip side, stability around Rs 7,038 levels may see a positive rally towards Rs 7,200 mark, as per the daily chart. The Moving Average Convergence Divergence (MACD) has  broken the zero line downward, suggestive of the weak direction ahead. CLICK HERE FOR THE CHART

Hero MotoCorp Ltd (HEROMOTOCO)
Likely target:  Rs 2,600 and Rs 2,500
Downside potential: 4.50% and 8%

The formation of “Head and Shoulder” pattern suggests weakness below the support of 100- weekly moving average (WMA), currently placed at Rs 2,728 levels. This may result in a bearish sentiment in the counter that could see Rs 2,600 and Rs 2,500 levels in the sessions ahead. The RSI is trading below the significant value of 50. If continues to trade negative for a few more sessions, hero MotoCorp may slip further. CLICK HERE FOR THE CHART
 
Tata Motors Ltd (TATAMOTORS)
Oulook: the share needs to gain stability above the sentimental mark of Rs 300 levels.

A breach below the significant support of Rs 325 has resulted in a downside that breached the crucial support of Rs 300. The immediate support for Tata Motors' stock comes in at Rs 200-DMA, which is currently placed at Rs 265 levels. The overall trend is suggesting a sideways move. Unless the counter manages to gain some stability above Rs 300, the upside bias is likely to stay light and market participants would prefer to stay on the sideline. That said, the RSI has emerged above the oversold territory, indicating a positive bias in the immediate term. CLICK HERE FOR THE CHART

Eicher Motors Ltd (EICHERMOT)
Likely target:  Rs 2650
Upside potential: 2%

The counter is currently hovering around 200-DMA placed at Rs 2,568 levels. Only a decisive close below the moving average, that is supported by strong volume may open the door for a downside rally. On other side, the immediate resistance comes at Rs 2,600 levels. Upon crossing the same, Eicher may rally towards of Rs 2,650 levels. CLICK HERE FOR THE CHART