Shares of Maruti Suzuki, which rose over ten-fold in six years through 2017, seem to have lost the steam. The stock has corrected close to 16% since January after its record-setting run, beating the Nifty returns for six years in a row. Among its most stellar returns were a gain of 88.8% in 2014 and 82.9% in 2017.
The Maruti Suzuki stock slid 2.3% on Wednesday to hit a ten-month low of Rs 8,210.35 on NSE. The share price of the country’s largest car maker was down 16.5% from its July 24 record of Rs 9832.45 even as the benchmark indices continue their record-breaking rally. The company has seen an erosion of Rs 49,000 crore in its market capitalisation from its July peak.
Market participants observe the extended weakness in the rupee, rising crude oil prices and lingering tariff war between the US and China have made the stock less attractive to the investors.
Barring two, the stock of Maruti ended in the red in every trading sessions so far in September. The stock fell 9.7% since the beginning of the month, making it the worst performer in the Nifty Auto index in month-to-date.
The trade war between China and the US will affect all nations, Maruti Suzuki chairman R C Bhargava said during the company’s 37th annual general meeting (AGM) in New Delhi last month, adding “uncertainty in oil prices will also adversely hit growth of auto industry and the economy.”
The benchmark Nifty50 has gained 6.7% since January. The Brent crude which is hovering close to $79 per barrel has increased over 11% since August 15.
Deutsche Bank opined strengthening yen against rupee will make imports of parts from Japan costlier. “A one per cent gain in the yen versus the rupee leads to a 0.7% drop in Maruti’s earnings per share,” the brokerage said in a recent note.
The Japanese yen has strengthened 13.7% against the rupee since the beginning of 2018.
While the stock of Maruti Suzuki rose at a compound annual growth rate (CAGR) of 45.5% between 2013-17, the Nifty50 gained 12.3% during the same period. In fact, when the benchmark yielded a negative return of 4.06 in 2015, Maruti Suzuki rose 38.8%.