FUNDEMENTAL RESEARCH :-
Automobiles: Demand weakens further; to remain so for next couple of quarters
Sector overview and outlook
Demand has weakened across auto segments on the back of economic slowdown and consequently weak consumer and business sentiments:
– Two-wheelers: While retail demand has been weak in March, wholesale dispatches were also impacted as players partially corrected high channel inventory (by a week). Motilal Oswal estimate channel inventory for Hero & Bajaj at 4-5 weeks.
– Passenger vehicles: The petrol segment remains weak for over a year now due to sharp rise in petrol prices. Now, even diesel segment demand has also moderated over the last 4-5 months (with y-o-y drop in volumes).
– MHCVs: The segment continues to fall sharply reflecting tough macroeconomic conditions. This coupled with higher competitive intensity has resulted in high level of discounting.
– Tractors continue to struggle due to weak demand from Southern and Western regions.
Expected softening in interest rates, and reform-led revival in business and consumer sentiment are key medium-term drivers for auto volumes.
Date:- 9/4/2013
Positional call
Script name – MAHINDRA AND MAHINDRA (M&M)
Technical call – sell M&M @ 850-840 sl 910 target 750-700
Holding period – 2-3 months
Technical view – MAHINDRA and MAHINDRA having 200 MA support at 842 level and today it has given close below 200 MA level so it’s indicating technical weakness in this script. At upper side 100MA is now at 910 levels so this is assumed to be nearest resistance for M&M. down side support levels are 800, 750 and 700.
RSI study indicate that is has broken the support level of downside trend line around 40-43 level and now it may look to enter below 30 level which is assume to be selling zone (or oversold zone).
With reference with the above technical study in given call we maintain technical sell signal and recommend it to hold with sell signal until and unless it’s not reversing the trend or its not taking any support or till it’s not hitting our given target.