Auto Stocks Go Downhill On Drought Worries

Mumbai, July 28: | Updated: Jul 29 2002, 05:30am hrs
Drought-like conditions have dampened the stock prices of the automobile sector, with prices on auto counters dipping by as much as 13 per cent in the last week.

The sector, which was showing signs of recovery in the last few months after a long slowdown, has again taken the backseat on worries of falling rural demand in the absence of disposal income generated from the rural sector.

On The Stock Exchange, Mumbai (BSE), the stock prices of the automobile majors have taken a beating in the range of 6 per cent to 13 per cent in the time period of July 22 to July 26, 2002.

The stock price of Tata promoted auto major Telco fell as much as 13.4 per cent in the time period July 20 to July 26, 2002, while that of Mahindra & Mahindra dipped to 9.4 per cent.

Dealers said that considering the fact that seventy per cent of the sales of auto majors has been generated from the rural economy, with the sales of medium and large commercial vehicles, the market sentiment is now reacting in tandem with the anticipation that the demand for the same shall fall drastically with the delay in the arrival of the south westernly monsoons.

Auto sector stocks have taken a beating currently after showing continual surge over the bourses in the past three to four months, especially in the past two, based on the profit booking, dealers added.

However, with auto majors offering loans at zero per cent interest, the aspirational value has seen a boost in consumers, automobile analysts said.With such incentives being offered to consumers dealers and analysts are unanimous in the bullish outlook about the stocks in the automobile sector, saying that the auto sector stocks have taken a beating merely in the short run.

In the past few months, the stock price of automobile majors had seen a sharp surge due to high rate of profit bookings.