Bad Car-ma: Automobile Stocks Fall To 20-Month Low; Weak Rupee, Fuel Prices Cited As Reasons

The automobile index slipped nearly 3 per cent on Wednesday (October 3) to reach a 20-month low. BSE Auto index has crashed nearly by 21.45 per cent. This is despite the Sensex gaining nearly by 5.63 per cent.

The reason is being attributed to a rise in fuel prices, increasing insurance premiums and even Kerala floods. Even the rupee weakening against the dollar is said to be a soft-factor for the decrease. Live Mint has reported that among the stocks under BSE Auto Index, some companies have lost between 16 to 47 per cent. These include TVS Motor Co. Ltd, Tata Motors Ltd, Bajaj Auto Ltd, Hero MotoCorp Ltd etc. The only beneficiaries are Mahindra, Exide and Ashok Leyland.

The GST council is considering an increase in tax on luxury vehicles, which is also one of the reasons for the fall, experts say. Based on earnings of FY19, the per share earnings of BSE Auto have been cut by 11.36 per cent and 9.4 per cent for this and the following fiscal respectively.

Exporters such as Maruthi have been warned against losing out by IIFL Securities Ltd. However, Bajaj, Bharat Forge and a few others might gain. Earnings per share (EPS) of Maruthi Suzuki have been cut by IIFL by 4 per cent since their imports come up to almost 22 per cent of the revenue. Fluctuations in foreign exchange has been cited as as reason as it impacts margins almost immediately.