Auto Stocks Outlook for the week – 29.02.2016 to 04.03.2016
(Budget
push to infra eyed; bias positive)
Shares
of major auto companies are seen taking cues from the Union
Budget
2016-17 (Apr-Mar), analysts said, highlighting that hopes would
hinge
on any rationalisation in excise duty on cars by Finance Minister
Arun
Jaitley and steps to bring it closer to rates as envisioned in the
Goods
and Services Tax. Currently, the total tax rate on small cars is
30%,
large cars 42% and sports utility vehicles at 51%. These may be
lowered
to converge with the GST rate, which is expected to be 18% for
small
cars and 40% for large cars and SUVs.
Auto
stocks are seen trading with a positive bias, tracking Budget
announcements
aimed at an infrastructure push, and reviving the rural
economy,
both critical to the revival of auto sales. In the later part of the
week,
auto stocks will take their cues from the monthly sales numbers to
be
announced by companies on Tuesday.
Shares
of Maruti Suzuki India Ltd are seen taking a further hit as sales
numbers
are seen falling on production impact given that the company
had
to shut operations for two days at Gurgaon and Manesar plant in
Haryana
due to the Jat quota agitation. Operations at Gurgaon and
Manesar
plant had to be halted because the agitation affected parts supply
to
the company's units. On an average, the country's largest passenger
carmaker
manufactures 5,000 units a day.
Both
Ashok Leyland and Mahindra and Mahindra may also trade with
positive
bias on the government hiking its infrastructure spending.
Mahindra
and Mahindra, which fell the least this week, is an undervalued
stock.