The inflow of good news appears to have removed the dark shadows hovering around the stock, after it had touched its ten-year low of Rs 86 on expectation of dimisal performance for the first half. The company reported a loss of Rs 54.5 crore. But is there light at the end of the tunnel? The market appears to be reading too much into the positive news that is flowing in. All the three, depreciation benefits, rise in production and competitive pricing of Indica may not mean much for the bottomline of Telco in the near future. The wait could be much longer.Although there is speculation that the government is likely to announce some changes in the accounting policies in order to provide depreciation benefits to the HCV buyers but would this give a big push to sales? Freight rates, a leading indicator of commercial vehicle demand, remain weak. This combined with a five per cent cut in the railway freight had resulted in significant idle truck capacity. Thus an improvement in the freight rate is unlikely to come unless enough cargo is generated to absorb the current idle capacity. Even if the freight rates improve, it will be at least four to six months before this results in an improvement in demand for commercial vehicles.

Even the expected increase in demand for cargo on the back of the construction initiatives (the Rs 28000 crore North-South and East-West road corridors) promised in the recently announced economic revival package is unlikely to come in the near future. The project will take some time to take off as there will be many hindrances like landaquisitions, fund mobilisation etc. Although the report that the company's two plants, namely Jameshedpur and Lucknow, have improved the production by 70 per cent for the month of October does indicate that the company is expecting sales to pick up in the coming months. The second half is generally better for the commercial vehicle sales. Jameshedpur and Luknow units are reported to have produced 3338 vehicles for the month of October as against 2000 vehicles produced in the month of September. But these figure are not enough as the company's largest plant's (Pune) output has not been included. For the month of September the company produced total 8396 vehicles (4865 LCVs, M & HCVs).

Telco has produced 52390 vehicles till September 1998 while last year its Pune plant alone produced 52000 vehicles till September. While the production at the Jamshedpur and Lucknow facilities, during the same period were 25,500 units.

Announcement of indicative price of Rs 2.5 lakh for its much awaited `Indica' has alsoimporved the sentiment in the stock. The pricing is attractive as other two competitors, Santro and Matiz, have not suceeded in providing a challange(in terms of pricing) to the market leader Maruti. As a result of attractive pricing the company is likely to recieve good demand initially but it is the performance of the car which will decide its fate.

Even the low purchasing power of the consumer due to recession in the economy might lead to market projections of demand going haywire. In the best case scenario the company is likely to sell 6000-7000 cars in the current fiscal. However the launch costs of Indica are likley to be drain on the bottomline in fiscal 1999. The full impact is likley to be seen only in fiscal 2000.