Auto stocks zoom on budget expectations, SC order

Daily
change (%) Weekly
change (%) TVS Motors1084.476.96 Maruti662-0.525.24 Mahindra & Mahindra5241.134.82 Ashok Leyland32-0.313.05 Bajaj Auto20521.732.49 Tata Motors6592.062.08 Hero Honda8620.191.20  On Wednesday, Tata Motors gained 2.06 per cent to Rs 659, while Mahindra & Mahindra gained 1.13 per cent to Rs 524 and Bajaj Auto increased by 1.73 per cent to Rs 2,052. Hero Honda inched up 0.19 per cent to Rs 862 and TVS Motors shot up 4.47 per cent to Rs 108, even as Maruti and Ashok Leyland witnessed a marginal fall.  Nevertheless, most of these auto stocks have appreciated in the range of about 2-5 per cent in the past week, except Hero Honda, which increased by 1.2 per cent. Over a one-month period, the BSE Auto index has posted a growth of 7.72 per cent, more than the Sensex growth of 7.66 per cent over the same period.  The vehicle sales of Tata Motors rose 11.4 per cent y-o-y in December '05, even as exports dipped by 0.7 per cent to 3,831 units. M&M moved up after acquiring a 98.6 per cent stake in a UK-based forging firm.  S Ramnath, vice president - research, SSKI Securities, says that although there has been FII buying in a basket of large-cap stocks across all sectors on back of new allocations for India, the interest in auto stocks is being fueled by expectations of excise-duty cuts on small cars in the Budget. With the market sentiment generally good, expected better sales in January are driving the auto sector.  If the Budget cuts the excise-duty on small cars from 24 per cent to 16 per cent or 20 per cent, their sales are likely to spurt in March and beyond.  Ramnath feels that two-wheelers are also likely to see an uptrend with an expected 17 per cent growth for FY06 in motorcycles. Although sales of medium and heavy commercial vehicles may remain flattish for FY06, they may see a 7-8 per cent growth in FY07. Light commercial vehicle sales have grown by about 40 per cent over the past nine months and would continue the trend for the last quarter.  Stock brokers say that the Supreme Court instructions on loading commercial vehicles only up to nine tonne will trigger more demand for trucks. Moreover, implementation of Euro-III and Euro-IV norms will also drive the replacement market.  A fund manager with ING Vysya Mutual Fund feels that the ongoing infrastructure activity, especially roads, will continue to create more demand for automobiles, even as good show in agriculture augurs well for two-wheelers and small cars.