- The automaker, Maruti, said it has increased the price of its popular compact sedan Dzire by up to Rs 12,690 on account of compliance with new safety and emission norms.
- Global brokerage house UBS downgraded the stock to SELL from BUY.
- UBS expects a 2% YoY decline in growth in FY20E against 4% growth earlier.
- The company is unlikely to gain from BS-VI norms as negative operating leverages have not built in.
- The sharp decline of over 20% in volumes during April and May. The 22% decline in volumes was led by a 23% yearly decline in domestic volumes and a 2% decline in exports. The weakness was seen across the segments.
Maruti fell very steeply from the 9200 levels in the first week of sep-18. The stock was down 30% in just one month. Since then the stock has gone sideways. The rally post the fall could not go beyond the 50% of the fall and that means weakness. Mind you the calculation has been made from a lower zone at 9200 and hence it spells more weakness. The Fibonacci confluence zone of 6277-6386 is good support and the stock has rallied several times from there. Today’s fall too halted in the same zone. Therefore the current rally is seen as a continuation of the recent fall. The continuous retest of important support is an indication of weakness. Break of the zone will take the Index down to the next Fibonacci confluence zone of 5500-5594. The RSI is still above the 40 levels at the price support and hence that is a tad positive. But the RSI cannot rally beyond 50 is an indication of weakness. Therefore the 5500 level seems to be better placed to buy the counter.
Government spending is something that we can witness. Probably there could be some delays with respect to BS-VI implementation or maybe some GST rate cut to ensure that the impact under BS-VI is not that high. These are the things that could be seen from the auto industry perspective to ensure that we may see some recovery in the space.