Auto stocks slip as traders worry over slack sales

July 16th, 2011 - 5:13 pm ICT by IANS  

Mumbai, July 16 (IANS) Automobile stocks closed lower this week, reflecting worries of traders over a slowdown in the sector with sales growth rising only about 12 percent in June.

The auto index on the Bombay Stock Exchange (BSE), closed 1.19 percent lower Friday at 8,993.51 points, compared to the previous weekly close at 9,101.45 points.

According to data available with the Society of Indian Automobile Manufacturers (SIAM), auto companies saw sales growing at a lower rate of 12.84 percent in June as compared to the like month of 2010.

While passenger cars recorded a substantially lower growth of 1.62 percent, utility vehicles sales grew by a meagre 4.36 percent.

As a segment, passenger vehicles grew under double digits in the April-June quarter, logging a growth rate of 8.77 percent over the similar quarter last year.

Rising cost of inputs and the incessant rate hikes by the Reserve Bank of India have strained the margins of auto companies. Banks too have passed on the rate hikes to its customers making auto loans that much costlier for the price sensitive small car buyer — which is the largest constituent in the passenger vehicle segment.

The government’s decision to free petrol prices, resulting in some big hikes of late, has also not helped this segment’s sales.

Among top auto firm listed on the bourses, as on July 15, Maruti Suzuki has lost 10 percent over a year while Hero Honda has dipped 7.1 percent.

“Going ahead, hikes in product prices, increased fuel price along with higher interest rates would be the major headwinds that could impact performance of the players,” said leading brokerage firm Angel Broking in a report.

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