Auto stocks skid ahead of RBI policy outcome, Nifty Auto index slips 1.6%

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Shares of rate sensitive automobile stocks were in focus on Wednesday ahead of the outcome of Reserve Bank of India's (RBI) bi-monthly monetary policy, with the Nifty Auto index falling as much as 1.64 per cent to 9061 levels so far in intra-day trade, weighed by shares of Bharat Forge, Tata Motors and Ashok Leyland.

Tata Motors fell as much as 3.15 per cent to Rs 170 in intra-day trade on the BSE after S&P Global Ratings lowered the credit rating of Tata Motors and its luxury car unit Jaguar Land Rover Automotive Plc (JLR), citing weaker-than-expected profitability at JLR.

On Tuesday, S&P cut its rating on Tata Motors’ issuer credit and senior unsecured notes to ‘BB-’ from ‘BB’. The ratings remain on negative watch, reflecting the uncertainties for JLR from a fast-approaching Brexit deadline, Reuters reported quoting S&P as saying. READ MORE

Shares of Bharat Forge slipped 9.5 per cent to Rs 526 per share, also hitting its 52-week low on the BSE on back of heavy volumes, on concerns of near-term demand challenges persisting for domestic commercial vehicles (CV) due to emerging concerns on tighter liquidity. The stock of a leading auto ancillary metal forging company was trading at its lowest level since May 24, 2017. READ MORE

Ashok Leyland also fell as much as 3.8 per cent to Rs 103 on the National Stock Exchange (NSE) as it's sales of medium and heavy commercial vehicles (M&HCVs) fell 18 per cent in November. The numbers were much below analysts’ estimates.

While some fleet operators postponed purchases on account of low consumer sentiment, other reasons for the muted sales were higher interest rates, rising fuel costs, and most importantly the tightening of liquidity, analysts say. Higher axle load norms also contributed to the fall in volumes. Analysts at Nomura expect the weak trends to continue.

"Sales across company/segments were weak in November and/or lower-than-expected. Passenger vehicle (PVs) industry continues to decline. While the two-wheeler (2W) industry saw a mixed trend, most original equipment manufacturers (OEMs) have indicated sluggish retails. The big negative surprise is the sharp fall in the MHCVs segment," wrote Joseph George and Suraj Chheda of IIFL in a recent sector report.

Adding: "Overall auto demand outlook remains challenging, given low consumer sentiment, rise in vehicle prices and financing issue. The only silver lining is the sharp reversal in crude price and resultant relief in fuel prices. Based on YTD trend and asking-rate, we see the highest risk (3-5%) to our FY19 volumes assumptions in case of Hero, Eicher and Ashok Layland."

Top losers in Nifty Auto index at 11:21 IST

BHARAT FORGE 533.00 580.45 -47.45 -8.17 5535885
MOTHERSON SUMI 158.65 167.15 -8.50 -5.09 3622145
ASHOK LEYLAND 103.70 107.30 -3.60 -3.36 15439407
TATA MOTORS-DVR 93.35 96.25 -2.90 -3.01 1124581
TATA MOTORS 171.35 175.75 -4.40 -2.50 6005626

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