Auto shares rally; Maruti Suzuki, Hero MotoCorp, Tata Motors up 5%

Shares of automobiles companies have rallied by up to 20% on the bourses as the government's focus on rural incomes and infrastructure development is structurally positive for the sector.

Tata Motors, Maruti Suzuki India, Hero MotoCorp, Force Motors, SML Isuzu, Atul Auto and TVS Motor Company have rallied more than 5% each.

Read more from our special coverage on "MARUTI SUZUKI, AUTO INDUSTRY"

At 02:51 PM, the Nifty Auto index, the second largest gainer among sectoral indices after FMCG index, was up 4.2% or 302 points at 7,394 as compared to 3.2% or 222 points gain in the Nifty 50 index at 7,209.

Finance minister Arun Jaitley announced infrastructure cess of 1% on small petrol/ compressed natural gas/ liquefied petroleum gas cars, 2.5% on small diesel cars, 4% on big sedans and sports utility vehicles (SUVs) and a 1% additional luxury tax on passenger vehicles priced over Rs 1 million.

According to CRISIL Research, in the near term, the infrastructure cess and additional luxury tax on passenger vehicles (excluding taxis) will drive up prices and reduce demand. Within passenger vehicles, demand for diesel vehicles, large sedans and SUVs will be relatively more impacted.

Higher spending on national highway projects will spur sales of construction trucks. Continued focus on rural development schemes will also indirectly aid sales of tractors and two-wheelers, the research firm said in Budget Analysis.

Among the individual stocks, Atul Auto has zoomed 20% to Rs 510 on the NSE in intra-day trade. The company manufactures diesel three wheelers like 6-seater auto rickshaws, pick-up vans for local transportation of goods and chassis of passenger vehicles.

Maruti Suzuki India was trading 8% higher at Rs 3,497 after the company reported a marginal 0.9% year on year drop in total sales at 117,451 units for the month of February 2016. The company had sold a total 113,606 units in January 2016.
Total production loss due to this was over 10,000 units. Despite that, the company was able to achieve marginal growth in domestic sales, Maruti Suzuki India said in a statement.

The company’s domestic sales were marginally up with total 108,115 vehicles sold in February against 107,892 units in the corresponding month of previous year.

Hero MotoCorp surged 7% to Rs 2,680, followed by TVS Motor Company by 6% at Rs 284 and Tata Motors up 5% at Rs 315 on the NSE.

 

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