Relative Strength (Or Lack Thereof): Auto Stocks
Today’s U-turn in the BSE Sensex market index is being blamed (in part) upon stocks in the automotive sector: Auto stocks drive Sensex down 70 pts
Marketmen said there were less buying of vehicles after a rise in interest rates, which was further fuelled on reports that car and two-wheeler makers have cut production.
Here is a chart that compares the performance of the S&P CNX Nifty-50 index with that of various auto stocks - Hero Honda, Bajaj Auto, Maruti, Ashok Leyland and Tata Motors:
There is little doubt as to the weakness of the auto sector relative to the Nifty. A look at the relative strength chart in March would have saved investors a lot of grief (and money) since!
Several recent articles echo these issues:
Companies like Hero Honda, Bajaj Auto and TVS are cutting down dealer billings, say motorcycle industry insiders . . . demand has been severely hit by the interest rate rise and resultant financing squeeze. Motorcycle demand hit negative terrain in March, when sales to dealers slid 3.5%. In April, it was down 10%.
Analysts feel that sales will improve only once the interest rates stabilise. Input cost for tyre companies is also on the rise and they have to contend with increased pressure because of rising rubber prices.
Related Posts: