Auto Stocks Outlook for the week (16-20.07.2012)
Looming diesel price hike, announcement of Apr-Jun earnings,
and monsoon rainfall are going to lend direction to auto stocks next week. Hero
MotoCorp will announce its earnings for Apr-Jun on Thursday.Hero could surprise
positively in terms of profitability. Reports of a hike in diesel prices after
the presidential polls, which are also due Thursday, have been doing rounds for
some time and any significant hike in the fuel's price could cause a knee-jerk
reaction in the auto sector especially in Mahindra & Mahindra counter.
Most of Mahindra & Mahindra's models are diesel run.
Monsoon rains, which have been 23% below normal so far this year, will also add
to headwind for the auto stock counter. If rains continue to be weak it will
hit sales of auto, especially in rural areas. Bajaj Auto, which will report its
June quarter earnings Wednesday, is seen reporting a meagre 3% rise in net
profit. Bajaj Auto stock is seen performing flat to negative. We expects Maruti
Suzuki to outperform in the short term, as sees no further hike in petrol
prices in the near term. Also, the commencement of the festive season from
August will support sales.
