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Informist, Friday, Dec 20, 2024

MUMBAI - Shares of automobile companies are expected to trade with a negative bias next week in the backdrop of weak retail demand in the first two weeks of December, and lack of positive domestic triggers, according to analysts. The automotive space has been in a consolidation phase for the past few months even as the broader market has gained. The trend is expected to continue till the start of the Oct-Dec earnings season.

In the first few weeks of December, when the broader market witnessed a rebound, auto stocks did not bounce back. This is because investors remain cautious in their approach due to weak retail demand after the festival season, said an analyst at a domestic brokerage. 

This week, the Nifty Auto closed 5% lower at 22580 points. By comparison, the benchmark Nifty 50 and Sensex declined 4.8% and 5%, respectively. All 15 stocks in the Nifty Auto declined over last week. Tata Motors, Exide Industries, and Ashok Leyland were among the biggest losers. Next week, support for the auto index is seen at 22000 and resistance at 23500.

Till the December sales announcement or quarterly results, the auto space is expected to show relative underperformance. The Nifty auto index is much below its 200-day exponential moving average, which is a bearish sign, said Ruchit Jain, vice-president of technical research at Motilal Oswal Financial Services Ltd. The auto index could correct up to 22000 from 22600, and if it breaches 22000 support. Then, one could see a further slide to 21000, he said. 

Retail sales of two-wheelers are headed for the first drop in December in two years, with the first half of the month registering a 19% on-year fall. Between Dec. 1 and Dec. 17, two-wheeler sales were 733,000 units, down from 899,013 units a year ago, according to data from the government's Vahan portal. At the end of November, even though the overall passenger vehicle inventory was reduced by about 10 days, it remained high at around 65–68 days.  

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Darshan Nakhwa 
Edited by Avishek Dutta

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