Commodity OnlineMUMBAI: The third stimulus package by the government in the form of an across-the-board cut in excise and service tax rates to boost the domestic economy is believed to have shown its impact on Auto and its allied sectors including steel, engineering and rubber.
According to experts, India’s auto industry is expected to continue growing despite global slowdown. The demand is found to be still high with no shortage of raw materials. The current economic environment is said to be conducive for the growth of the auto industry. This is further expected to boost steel, aluminium and rubber industry.
According to the available industry figures, the overall automobile production had fallen by 6.11% in November 2008 over the previous year. Sales across all sub-segments of the passenger car market had registered a negative growth rates during the period April-November 2008 as against in 2007. Exports fell considerably and domestic sales hit the bottom.
The cascading effect of the slowdown in the auto sector was witnessed in the steel and aluminium sector as well. As the usage of the metals reduced considerably leading to a stock pileup, following which companies had to stop production and the recessionary cycle took off.
Auto major Tata Motors fell from its six month highs of Rs. 436.5 in September 2008, to Rs. 128 during December 2008. Similarly, Mahindra & Mahindra Ltd fell from Rs. 590.45 in September to Rs. 242.80 during December 2008, while Maruti Suzuki fell from its six month high of Rs. 741.65 to Rs. 460.05 in November-December period.
Similarly, metal stocks including Tata Steel and public sector NALCO fell considerably from their six month highs during September 2008 to the lows in December. Tata steel fell to Rs. 148.65 in December 2008 from Rs. 589.2 in September. National Aluminium Company Ltd Fell from Rs. 419 to Rs. 139.15 in November.
However, some recovery was witnessed in the stock prices with the announcements of two stimulus packages in December-January and the third recently.
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The stock prices of auto companies started recovering with the possibility of increased demand in the auto ssegment. The positive sentiment prevailed in the metals sector as well which showed some improvement in the stock performance of the companies. Where Tata Motors and M&M rose by around 12% and 15% respectively during past week after the announcement of third stimulus package, the stocks of NALCO, rose by close to 8%, while Tata Steel too showed some recovery from its six month lows to Rs. 172.35 on Friday.
Another major allied industry for auto, rubber too witnessed some extent of volatility during past few days. Elgi Rubber Company Ltd witnessed a recovery from its lows of Rs.4.65 in December to Rs.5.35 on Friday. Similarly, Apar industries Ltd recovered from its lows of R.s69.90 during January, to Rs.80 on Friday.
The stimulus party is expected to continue as there is anticipation of further price cut in commercial fuel, diesel. The metal and rubber industry expect rise in the orders from the automobile sector, which may lead to an upsurge in stock price.
