Posts Tagged ‘RBI


Tata Motors stock hammered down..

Tata Motors share price has fallen 17.7 percent in last 2 days from its intra-day high of 283.1 on 29th May. The auto-maker declared its Q4 and full year results on 29th May. JLR contributes majority of Tata Motors net profit and any dip in JLR margins would be detrimental to Indian auto maker’s fortune. Luxury automaker’s operating margins for the quarter were 14.6 percent as compared to 17-17.5 percent of analyst expectations.

I think more than results, it was a clear case of over expectation. Stock was over-owned and every major fund had been bullish on the stock. So, in the short-term it was an overreaction and the stock was hammered down. It would take some time for Tata Motors stock to stabilize and move back up.  I sold a few OTM calls of June series, but I am not very aggressive in selling calls. Main reason for this is that in the short-term stock is oversold and also JLR May numbers are due around mid-month. I would like to see JLR May numbers after not so good April numbers. Moreover, June month is event heavy and we could see movement both ways. We might even see action from RBI after shocking Q4 GDP numbers.


Opportunity: Maruti dealers have inventory for 28 days

As soon as I opened today’s BS newspaper and saw the headlines, I sensed my new opportunity.

New Index of Industrial Production (IIP) series figure released last week, Q4 FY11 GDP figure, May Auto sales figure, HSBC Purchasing Managers Index (PMI) – all point in one direction of slowing economy. All auto-makers were struggling with margin pressure on account of rising commodity prices, but with rising interest rates, signs of demand destruction are also quite visible.

Passenger car segment in India is highly competitive. Today country’s largest car maker, Maruti Suzuki’s chairman Mr. RC Bhargava said, “company dealers have inventory for 28 days”. It clearly shows that the company is struggling with sales growth and consumers are deferring the decision to buy a car. As if, all of this was not enough car-maker is also struggling with strike at its Gurgaon plant for past one week, leading to several crores of loss every day. Given all the concerns around automakers in general and Maruti in particular, I don’t expect stock price to cross 1300 level in a hurry. In case RBI does not increase repo rates in its 16th June review, there might be some rally in rate sensitives including Maruti. I have sold 1350 call and looking to sell 1300 call for June series, just waiting for the RBI meet…

May 2018
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