Stocks turmoil subside, bringing in a sigh of relief for auto industry

Friday 23 December 2011, 10:57 AM by

2011 has been a dismal year for the auto sector of India which is clearly evident from the figures of stock exchange registered by major manufacturers. The stocks of many manufacturers have suffered during the year 2011, though Bajaj, going against all odds, emerged at the top in terms of stock value. The year started-off with a 2.21 per cent decline, recorded on 6th January 2011, as compared to 31st December 2010. In the first week of the year, Bombay Stock Exchange (BSE) auto index registered a rise of 30.21 per cent as compared to Sensex that witnessed a 14.03 per cent hike.

The stocks of major auto manufacturers like Mahindra & Mahindra, Ashok Leyland, Tata Motors, TVS Motor Company, Maruti Suzuki India and Bajaj Auto were down. Throughout the year, the rise and fall of stocks of auto companies continued, with Maruti Suzuki India Limited suffering the most due to the labour problems at its Manesar plant. The fluctuations in the sales of India's leading passenger car maker added to the vows, weakening trading rate of the stock.

Boosted by Reserve Bank of India (RBI) approach to maintain the repo and reverse repo rates at current rates, stock market trend has inclined towards a positive situation. The move adopted by the regulatory body has emerged as a rescuer for auto makers, which witnessed dip in stock rates due to rising inflation and slowdown in India's economy. The move from RBI came at the mid-quarterly review of the monetary policy, held on 16th December 2011. As a consequence, auto stocks listed on the BSE registered a growth ranging from 0.32 per cent to 2.14 per cent.

In the interest of auto companies, RBI maintained reverse repo rate at 7.5 per cent and repo rate at 8.5 per cent. Auto index on BSE climbed by 1.59 per cent, totalling to 8,298.34 units, which overshadowed the Sensex that grew by 0.54 per cent, summing up to 15,921.96. Owing to lower interest rates, auto companies engaged themselves in the production of passenger cars, utility vehicles and commercial vehicles to take advantage of RBI's move. The foremost objective of the move was to enhance sales performance for the automotive industry and over a period of time, the situation seems to improve.

Stocks turmoil subside, bringing in a sigh of relief for auto industry | CarTrade.com
Stocks turmoil subside, bringing in a sigh of relief for auto industry

The strengthening of stocks has stabilized conditions after a prolonged trend of weak stocks. Maruti's auto stock was one of the weakest of all, primarily due to its dwindling sales. At the close of fiscal 2011, stocks of all auto companies have become upside, including Maruti Suzuki India Limited. Bajaj Auto is the biggest gainers among all the auto companies in India recently.

On 16th December 2011, stocks of Tata Motors experienced a jump of 1.94 per cent to the previous day, while TVS Motor Company stock rose by 1.23 per cent. On the other hand, Bajaj Auto witnessed a hike of 2.14 per cent in its stock and Mahindra & Mahindra's stocks rose by 1.42 per cent. Hero MotoCorp Limited’s stocks witnessed an increase by 1.34 per cent whereas Ashok Leyland saw a growth of 0.84 per cent. In addition, Maruti Suzuki India traded at a value that rose by 0.32 per cent.

Thus, the current situation seems to be under control for car makers which continue to tap the potential situation to extract maximum advantage.

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