Escorts, Bajaj-Auto: Trading strategies for auto stocks post Feb sales nos

Auto index trades with a sluggish bias, may lose grip if falls below its 200-DMA

Nifty Auto index has remained a laggard in the February, post missing to reach a new historic peak. The index touched 13,539-mark, just 5 points shy of a new all-time high. Now, as the automobile companies released their sales numbers, which largely appeared mixed on the weak export numbers, the index is expected to be in the spotlight for coming sessions.

While Escorts Kubota and Ashok Leyland posted compelling sales numbers, Maruti Suzuki India and Bajaj Auto seem to have disappointed.  Maruti Suzuki export sales plummeted by 28 per cent, while Bajaj-Auto sales fell by 11 per cent. 

Escorts Kubota and Ashok Leyland both reported close to 27 per cent increase. Mahindra & Mahindra perceived a growth 8 per cent. Hero MotoCorp saw increase of 10 per cent, but the export figures saw 50 per cent cut. Likewise, TVS Motor Company’s total sales were impacted by decline in export sales. 

On Friday, while benchmark indices, the BSE Sensex and Nifty 50 surged close to 1,50 per cent, shares of automobile companies such as Maruti Suzuki, Hero MotoCorp, Bajaj Auto traded with muted gains. Barring Tata Motors and Mahindra & Mahindra, which rose 1.20 per cent and 1 per cent, respectively, others were laggards in trades. 

Here’s the technical outlook on automobile stocks amid release of their monthly sales numbers:-

NIFTY AUTO

Outlook: Trading in a broader range 

The Nifty Auto index is trading in a broader range of 13,500 to 12,200 levels and has managed to hold the support of the 200-day moving average (DMA), which appears to be bolstering the upward bias. The immediate hurdles exist at 13,000, and once this mark is cleared, the index may again attempt to overcome 13,500 level. The 200-DMA is set at 12,604. CLICK HERE FOR THE CHART

Escorts Kubota Ltd (ESCORTS)

Outlook: 200-DMA holds key support

Until the support of Rs 1,923 is safeguarded, its 2000-DMA, the counter may uphold the positive bias. However, if it fails, then a breakdown of the “Head and Shoulder” pattern may see stock falling towards 1,729-mark, its next crucial support. 

On the higher side, the stock needs to overpower the hurdle of Rs 2,160 to breakout on upside. When that transpires, the stock may rally to Rs 2,300 level.  CLICK HERE FOR THE CHART

Bajaj Auto Ltd (BAJAJ-AUTO)

Likely target: Rs 4,200 (once Rs 4,000 ic crossed)

Upside potential: 5%

There is a “Double Bottom” formation on the weekly chart, suggesting continuation of a bull run. Thus, as long as the lows of Rs 3,460 and Rs 3,530 are shielded, the positive bias shall see a resilient trend.  

The momentum indicator, the Moving Average Convergence Divergence (MACD), has risen over the zero line indicating that underlying trend to be in favour of bulls if key supports are protected. 

The major breakout for the Bajaj Auto shares stays at Rs 4,000 level; once crossed, the counter may easily hit a new all-time high reaching Rs 4,200. CLICK HERE FOR THE CHART

Ashok Leyland Ltd (ASHOKLEY)

Outlook: Breakout over the 200-DMA

Not only has the counter broken the key support of 200-DMA, but the MACD has also fallen beneath the zero line. Both of these signal a negative bias for the counter. If the stock fails to overcome Rs 147, its 200-DMA, the trend may see aggravated selling pressure, resulting in stock price slipping to Rs 130 and Rs 120 levels. 

A breakout over Rs 147 could steer a sharp up move towards Rs 155 and Rs 165 mark, as per the daily chart. CLICK HERE FOR THE CHART

Hero MotoCorp Ltd (HEROMOTOCO) 

Outlook: Bearish sentiment

The broader outlook of the Hero MotoCorp shares clearly indicates the range of Rs 2,900 to Rs 2,950 has become a major hurdle for the bullish bias. At present, the stock trades below the 200-DMA illuminating weakness and a bearish sentiment. If continues to trade sluggish, the stock may dwindle to its 52-week low of Rs 2,115. CLICK HERE FOR THE CHART