GOLDEN RULES FOR TRADING

Auto Stocks Outlook for the week – 11 to 15.01.2016 (Further correction in offing next week)

Auto Stocks Outlook for the week – 11 to 15.01.2016
(Further correction in offing next week)

Extending the weak run, shares of major automakers are likely to see a
further correction next week, with most counters, including Maruti
Suzuki India Ltd, Hero Motocorp Ltd and Bajaj Motors Ltd, poised for a
further fall.

There's sharp correction on offer across all auto stocks. Expect them to
move with the market, which is also likely to fall further.
Maruti Suzuki is overvalued even at current levels. Some cooling off
was always on the cards, with the larger market conditions now having
become catalysts.

The stock may see a lot of pain even as fears due to its correlation with
China and some other markets mount. The company's subsidiary Jaguar
Land Rover has significant exposure in the Chinese markets, with the
country forming the second largest sales territory for JLR.

Hero Motocorp has seen continuing weakness in sales due to a slowdown
in the rural economy and growing competition from Honda Motorcycles
and TVS Motor Co. In December, the company's sales fell 5% on year to
499,665 units, a third consecutive month of flat-to-declining sales for the
country's largest two-wheeler maker.

A rebound, if any, in the market will hinge on corporate earnings for the
December quarter, this will be kicked off next week. Auto stocks will
also take cues from monthly sales data to be announced by the Society of
Indian Automobile Manufacturers. The industry body is likely to release
the numbers in the early part of next week.

Most auto companies, excluding two-wheeler makers, are expected to
churn out positive numbers, aided by December sales and end-of-year
buying.