Auto Stocks Outlook for the week – 21 to 25.11.2016
Stocks of major automobile companies are likely to see further correction next
week, in line with broader indices, as the market bias remains Negative. In the
longer term, outlook for the sector has taken a beating after the withdrawal of
500-, 1000-rupee currency notes last week, as the move it seen impacting sales
of all automobile companies across segments.
Over the last three months, factors such as pay increases for government
employees and a good monsoon this year had played a major role in keeping the
demand outlook for the auto sector robust.
However, the momentum seems to be running out of steam after the government
withdrew old 500-, 1000-rupee notes on Nov 8, resulting in an unprecedented
cash crunch scenario. In October, total passenger vehicle sales in the domestic
market had risen to 280,677 units, the highest since March 2012, up 4.5% on
year.
The CNX Auto index, which ended down 3.5% on week at 8983.85 points
yesterday, may fall further over the next few sessions. The initial support for the
index is seen at 8830-8750 levels and if it breaches that level, it can slip by 7-8%.
Resistance for the index is seen at 9000-9050 levels. Stocks of two-wheeler
companies are also seen correcting as most of them have entered overbought
category.
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