Posts Tagged ‘Tata Motors


Bajaj Auto December numbers..

Bajaj Auto posted lower than expected sales figures for December. The company shares fell sharply after sales figures announcement.The two wheeler company sold 305,690 units showing growth of 10 percent over the last year. It was below market expectations. Two wheeler companies like Hero Motocorp, Bajaj Auto and TVS Motors were trading at premium valuations as compared to Four wheelers like Maruti and Tata Motors. This premium was given on account of expected double-digit growth. But if the two-wheeler companies are also struggling and showing growth in single digit, then the premium valuation is unjustified.

I had sold Bajaj Auto calls aggressively last week. I don’t think company shares can rise sharply 13-15% from current levels in January series.


SBI follow up..

In my earlier post I had mentioned about selling SBI 2600 call for July series ( Yesterday I covered my sold SBI 2600 call at a slight loss. SBI crossed 2440 levels and even on a down day it was up 1.5%. I felt uncomfortable and cut my position. At this point of time I am not sure about SBI movement, but in case SBI goes up further from here than I might re-look at selling SBI calls.

In last 10 days India has seen lot of FII flows, close to USD 2 billion ( Significant amount of this money has obviously gone into large caps. Some stocks like SBI, Tata Motors had lot of shorts which got covered. I have to be careful while writing calls of some large caps. From next week, Q1 FY11 results will start pouring. Its better to wait for cues from result season and then proceed.


Trouble for Automakers..

Car sales growth slows to two years low was the major headline across business papers yesterday. Combination of higher interest rates and fuel prices is hurting automakers’ sales. In Q4 FY10, companies were struggling with higher commodity prices and its impact on bottom-line. Although commodity prices have come down from their highs, now automakers are fighting with slow sales growth. Companies are bringing down their sales forecast with market leader Maruti slashing it from 13% to 8% this year.

Among the listed players, Maruti and Tata Motors are particularly struggling. Maruti had lower domestic sales at 70,020 units (declined 3.8% from 72,812 last year) in June mainly on account of annual maintenance shutdown at Gurgaon and Manesar plants. Maruti also suffered on account of 13 day strike at its Manesar plant in June.  The market leader is facing stiff competition from Toyota, Ford, Nissan’s recent launches. In one of my earlier post (, I had mentioned about selling Maruti 1300 call in June series. In July series also I am looking to sell few OTM calls in Maruti, since I don’t expect Maruti share price to move substantially higher in this series. Maruti may not go down further from these levels, so it doesn’t make sense to go short at these levels.

Tata Motors is another listed player which is struggling with falling commercial vehicles (CV) and passenger car sales, particularly in domestic market. June domestic sales fell by 21% to 21,993 units from 27,811 units last year. JLR is silver lining with strong showing in China and other emerging countries. Tata Motors share price has come down sharply from 1150 odd levels since its Q4 results. I won’t short Tata Motors but will sell OTM calls. Just like Maruti, I don’t expect Tata Motors’ share price to rise much higher in July series.

M&M is different ballgame all together. June domestic sales for M&M grew by 21% to 16,053 units. One can say M&M has advantage of lower base, but still company tractor sales are growing rapidly. In Q4 results, M&M said they were struggling with margins on account of higher commodity prices. M&M should benefit this quarter since commodity prices have come down from its peak. M&M also fell after its Q4 quarter results, but recovered most of its lost ground. I won’t be comfortable writing M&M calls at this point of time.


Interesting times ahead..

All the news flow makes case for interesting and tough times ahead. US Dollar Index rose  by 1.7% yesterday (the largest single day gain since Aug’10), resulting in all risk assets falling sharply, including crude oil. Why USD Index rose is a bit confusing for me, since report after report shows that US growth on life support system by QE is slowing. Yesterday, Federal reserve bank of New York manufacturing index dropped to its lowest level since November last year. Part answer of USD Index rise could be trouble in its biggest constituent, Euro (57.6%). It is like a tussule between who is weaker between Euro and US.

Indian market should be happy with commodity sell-off. There might be some knee jerk negative reaction, but if crude keeps falling it should be good news for the Indian market. Another major concern, Interest rates should be nearing its peak after RBI  rate hike of 25 bps today. Is Indian economy slowing down sharply? Yesterday some of advance tax numbers did not give evidence to that. Infact advance tax numbers from top 100 companies in Mumbai region has increased by 14 percent.

As option writer, what does all this news flow means for me. Lot of major stocks RIL, Tata Motors, SBI, Maruti and ONGC are looking weak and they have already come down quite a lot. Its difficult for me to write any OTM calls since premiums are low and also there might be some rebound from oversold zone. Normally I don’t write puts and in this global turmoil I would be very cautious in doing so. Except for some oversold stocks like Reliance communications, I won’t write puts. Can’t do much at this point of time except wait and watch..Anyways for June series all my margin money is blocked in existing contracts.


Slowing China – Biggest Risk in writing Calls in Indian market

India is an evolving market and will continue to do so over the next 20 years. Foreign Institutional Investors (FII‘s) continue to dominate Indian market and their inflow continues to decide its direction. Last year, when FII’s pumped billions of dollars, market went up but this year when inflows are not so strong market is struggling to go up. Not many people invest in Equity markets and Mutual fund. The biggest problem I think, is the lack of stable long-term pension money. But over long-term with or without FII money Indian market will continue to go up and you don’t need any kind of BRICS marketing gimmick to confirm that. Structurally, we are in a bull market for next several years, but within that we will continue to overshoot and undershoot our long-term mean valuation of 15 PE. As option writer, I keep waiting for these overshoot and undershoot opportunities.

Last sunday there was an article in Business standard on slowing Chinese economy which might lead to sharp correction in commodities. As OTM Call writer, I would watch the situation in China very carefully since, rising commodity prices especially crude oil prices has been a major overhang on Indian markets this year. This quarter results confirm pressure on operating margins, rising input costs, rising interest rates and with slowing Indian economy, situation doesn’t look very good. But lot of this could change if there is some kind of slowdown in world’s biggest consumer of commodities leading to sharp pullback in commodities.

For June series I sold M&M 740 call, Tata Motors 1200, 1250 & 1300 Call. M&M quarter result clearly reflect pressure on margins, which were lowest in last eight quarters and might fall further. M&M Stock saw sharp reaction on result day. Tata Motors is struggling in domestic Commercial Vehicles (CV) segment, although Jaguar Land Rover (JLR) contributes close to 50% of overall sales. Given poor economic data coming from US and Euro zone,  if there is slight slowdown in JLR sales coupled with slowing growth of Indian CV market then Tata motors is struggling big time. But lot of things might change for companies like M&M which have strong domestic business (tractor segment), if there is sharp pullback in commodities. Inflation may also come down quite sharply and ease pressure on RBI to raise interest rates, hence need to be careful while writing calls of companies like M&M.

July 2018
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