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PROJECT REPORT ON ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY
SUBMITTED TO :
MR. KUMAR BIJOY
ISHEETA NIRMAL (195) DEEPIKA GARG (188) RASHMI SHARMA (215) ROSHAN AGARWAL(218) VIKAS GUPTA (229) NIKHIL MAHAJAN (240)
NEW DELHI INSTITUTE OF MANAGEMENT
60, 50(B&C), TUGHLAKABAD INSTITUTIONAL AREA NEW DELHI-110062
NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10) GROUP-15, FINANCE-II
AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY
We hereby declare that the work presented in this Project entitled “ Analysis of
Indian Automobile Industry” submitted to Prof. Bijoy kumar (visiting Faculty) at
New Delhi Institute Of Management, New Delhi is an authentic record of our original work.
Signature of Mentor
Signature of Candidates
NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)
AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY
The satisfaction and joy that accompanies the successful completion of a task is incomplete without mentioning the name of the person who extended his help and support in making it a success. We are greatly indebted to Mr. Bijoy (Guest Faculty at NDIM), my Project Guide and Mentor for devoting his valuable time and efforts towards my project. We thank him for being a constant source of knowledge, inspiration and help during this period of making project.
ISHEETA NIRMAL DEEPIKA GARG RASHMI SHARMA ROSHAN AGARWAL VIKAS GUPTA NIKHIL MAHAJAN
NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)
AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY
Indian automobile industry has grown leaps and bounds since 1898, a time when a car had touched the Indian streets for the first time. At present it holds a promising tenth position in the entire world with being # 1 in Two Wheelers and # 4 in commercial vehicles. Withstanding a growth rate of 18% per annum and an annual production of more than 2 million units, it may not be an exaggeration to say that this industry in the coming years will soon touch a figure of 10 million units per year. The automobile industry in India — the ninth largest in the world with an annual production of over 2.3 million units in 2008 — is expected to become one of the major global automotive industries in the coming years. In this project we have undergone a detailed analysis of India automobile industry by using Fundamental and Technical tools. In order to better understand the performance of the industry we have made comparative analysis of Two players Tata motors as (leading player) and Maruti Suzuki. The project report is divided into 5 chapters. The first two chapters include Executive Summery & objective of the research. The third chapter deals with analysis of automobile Industry which entails fundamental and technical analysis of Indian Automobile Industry. The fourth chapter deals with Conclusion & Recommendations and the last chapter includes Bibliography.
NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)
D Chapter 4 Chapter 5 Conclusion & Recommendations Bibliography Annexure NEW DELHI INSTITUTE OF MANAGEMENT.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 5 TABLE OF CONTENT S. Objective of the Project Chapter 3. Economy b. Chapter 1.Financial & Non-Financial • Technical Analysis a. Share Price Analysis Moving Average Moving Average Crossover Bollinger Band e.C. Executive Summary of the Project Chapter 2. Company . Analysis of Indian Automobile Industry • Fundamental Analysis a.PGDM(2008-10) GROUP-15. M. c. b. Industry c.A. d. FINANCE-II .NO. PARTICULARS PAGE NO.
C. on Automobile Industry. Export. NEW DELHI INSTITUTE OF MANAGEMENT. of both the company by keeping TATA Motors as our leading company. At the end conclusion and recommendations have been specified so as to make the research work more meaningful and purposeful. For Company Analysis as a part of Fundamental tool we have undergone with the comparative analysis of TATA Motors as our leading company with Maruti Suzuki India’s largest Car manufacturer.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 6 EXECUTIVE SUMMARY The automobile industry. Bollinger bands and M. industry life cycle and the industry specific index. has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The Industry Analysis has been done with the help of five forces model. FINANCE-II . moving average crossover. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub. moving average.PGDM(2008-10) GROUP-15. FDI’s. GDP etc.D. In the Technical aspect we have considered Share price analysis. one of the core sectors.I. the impact of inflation.A. SWOT analysis. A detailed analysis of Automobile industry has been covered in respect of past growth and performance. Under this project to better understand the Industry we have used Fundamental and Technical tools to make it more authentic n meaningful. BCG Matrix. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. The fundamental aspect consists financial and Non-Financial analysis of both the company.C approach has been followed under Fundamental Analysis which covered effect of Recession. An E.
• • NEW DELHI INSTITUTE OF MANAGEMENT.PGDM(2008-10) GROUP-15. FINANCE-II . The main objectives of the Project study are: • Detailed analysis of Automobile industry which is gearing towards international standards • Analyze the impact of qualitative factors on industry’s and company’s prospects Comparative analysis of two tough competitors TATA Motors and Maruti Suzuki Application of various Technical Tools and Fundamental tools (like Financial and Nonfinancial statements).AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 7 OBJECTIVE OF THE PROJECT The objective of this project is deeply analyze our Indian Automobile Industry for investment purpose by monitoring the growth rate and performance on the basis of historical data.
C Approach) a.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 8 ANALYSIS OF AUTOMOBILE INDUSTRY Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. India is 16th in the world in terms of nominal factory output. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed.Technical Analysis 1) FUNDAMENTAL ANALYSIS a). FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT. Fundamental Analysis (E. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher.000 reflecting improvement in the living standards of an average Indian. Economic analysis is important in order to understand exact condition of an economy. The per capita Income is near about Rs38.I. ECONOMY Economic analysis is the analysis of forces operating the overall economy a country.1 per GROUP-15. Today.chart showing contributions of different sectors in Indian economy. GDP and Automobile Industry In absolute terms. the GDP growth has downgraded it to 7. With comparatively higher rate of economic growth rate index against that of great global powers. Economy b. Company 2).PGDM(2008-10) . India has become a hub of domestic and exports business. To understand this industry for the purpose of investment we need to analyze it by following two approaches: 1). As the world economy slips into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector. The service sector is growing rapidly in the past few years. automobile sector in India is one of the key sectors of the economy in terms of the employment. Industry c. This is the pie. The automobile sector has been contributing its share to the shining economic performance of India in the recent years.
A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment.31% growth while Commercial Vehicles segment slumped 21. But at the end of the year. Total number of vehicles sold including passenger vehicles.41 million. India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined. However. In December 2008.65 million in 2007-08. Although the sector was hit by economic slowdown.7%. Source:India Central Statistical Organization The market value of Automobile Industry is more than US$8 bl. Two Wheelers sales recorded 15. commercial vehicles.02 million to 8. and Contribution in Indian GDP is near about 5% and will be double by 2016.43 percent fall in December 2008 over the same month last year. two wheelers and three wheelers) increased from 10.86% over December 2007 Two Wheelers registered minor growth of 1. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesn’t suggest contraction in demand. Montek Singh (Planning Commission of India). Global recession has hit the Indian auto industry.72 million as compared to 9.83 million while two-wheelers increased from 8. Recession All the major auto companies enjoyed the high growth ride till the mid 2008. industry had to face the hard truth and witnessed the fall in sales compared to last year.21% on 22-Aug-09) we saw an increasing trend of sales in auto sector.17 million vehicles in 2008-09. two-wheelers and three-wheelers in 2008-09 was 9.85 million vehicles in 2007-08 to 11. Following is the graph showing a trend of Indian GDP trend in past 3 years.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 9 cent for 2008-09 and predicted it to be 6.85 % during April – December 2008. Inflation Despite of negative inflation these days (-. Passenger Vehicles segment registered negative growth. Passenger vehicles increased marginally from 1. commercial vehicles.77 million to 1. but growth rate in last FY2008-09 was only 0. FINANCE-II . NEW DELHI INSTITUTE OF MANAGEMENT. overall production fell by 22 % over the same month last year. while revising its inflation forecast for the FY through March to around 5% from 4%.PGDM(2008-10) GROUP-15.5 percent over the past five years.7% with passenger car sales shows 1. the Reserve Bank of India said few week back. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11. One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13.5 per cent for FY 2009-10 Mr. overall production (passenger vehicles.
PGDM(2008-10) GROUP-15.212 Cr an increase of 47. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car. higher interest rates. FDI inflows in Automobile Industry 2008-09 was Rs.FDI Statistics Govt. Source: rbi. target for exports by 2011 helps in increasing. which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry. Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles. the share of external sector in the economy and the size of risk-adjusted capital flows. has been permitted under automatic route to this sector.497 Cr. However. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. FDI’s In India FDI up to 100 percent. the effect of inflation has affected every sector which is related to car manufacturing and production. Following is the table shows the trend of foreign reserves held by central bank in last FY. The overall approach to the management of India's foreign exchange reserves in recent years reflects the changing composition of the balance of payments and the 'liquidity risks' associated with different types of flows and other requirements.oil price hike. The car market and the car industry witnessed a fall of 8-9%.5.org. India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0.9 per cent to 2. while in April-May 2009 it was around Rs. India's foreign exchange reserves continued to be at a comfortable level and consistent with the rate of growth. Reserves came down cause of recession all over the world however India still able to maintain its reserves hence a minor fall was seen compare to all other country which shows great strength in long-term for Indian Economy.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 10 In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back). FINANCE-II . Increase in Exports specially from auto industry shows an expectations of huge income from western countries and new $200 bl. Source.in Taking these factors into account.25% compare to 2007-08. of India Foreign Exchange India holds the third largest stock of reserves among the emerging market economies after China and Russia. Note: NEW DELHI INSTITUTE OF MANAGEMENT.5 per cent by 2015.
carmakers going to produce 70000units/month more over the average 1.739 units in 2008-09. commercial vehicles. two-wheelers and three-wheelers) in the overseas markets increased to 1. 2.53 million units in 2008-09 from 1. under this segment the market leader Hero Honda registered growth of 12% in its domestic sales where as Bajaj Auto disappointed as sales plunging by 23%. Current Scenario of Automobile Industry in Economy With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in near future. on the other hand car sales has been grew up by a healthy 22. Euro.FCA (Foreign Currency Assets): FCAs are maintained as a multicurrency portfolio comprising ajor currencies.7% in last February and Commercial Vehicles reported slower sales. RTP refers to the Reserve Tranche Position in the IMF. 11 Export Society of Indian Automobile Manufacturers (SIAM). automobile sales (including passenger vehicles. Pound sterling. Source: Economic Times NEW DELHI INSTITUTE OF MANAGEMENT.8% with the modest 2. 3. Despite recession. such as.3lac/month with help of 5000 new hands. SDR (Special Drawing Rights): Values in SDR have been indicated in parentheses. more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion. and is valued in terms of US dollars.23 million units in 2007-08. There is a continuous increase in the export of automobiles since the financial year 2002-03. Gold: Physical stock has remained unchanged at approximately 357 tonnes.6% growth rate. which may be attributed to the global economic recession. Export of passenger vehicles increased from 218. US dollar. Japanese yen. Two wheeler segment sales grew up by 12. It is assumed that in coming festive season to meet demand. except for the decline in the export of commercial vehichles in the financial year 2008-09.PGDM(2008-10) GROUP-15.401 in 2007-08 to 335.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 1. etc. FINANCE-II . 4. the Indian automobile market continues to perform better than most of the other industries in the economy in coming future.
estimated rate of growth of India Auto industry is going to be 9% . Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the nature of competition. To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016.75 million units by 2014.PGDM(2008-10) GROUP-15.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 12 Indian Automobile Industry at Global level: • • • • • India ranks 1st in the global two-wheeler market India is the 4th biggest commercial vehicle market in the world India ranks 11th in the international passenger car market India ranks 5th pertaining to the number of bus and truck sold in the world India is the second largest tractor manufacturer in the world. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing countries.) INDUSTRY ANALYSIS (AUTOMOBILE) The current trends of the global automobile industry reveal that in the developed countries the automobile industries are stagnating as a result of drooping markets.8% by 2014 at 11. FINANCE-II . Toyota. whereas the automobile industry in the developing nations. b. Hero Honda 33%. Nissan & Ford plan new cars to cash in on fastest-growing compact car section of car market in India. TATA by 11%. Segmentation of Automobile Industry The automobile industry comprises of Heavy NEW DELHI INSTITUTE OF MANAGEMENT. In 2009. Projected Growth rate in Automobile Industry • • • Passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3. Mahindra 42%. Volkswagen.The Indian automobile sector is far from being saturated.Skoda Auto 33%. Source: Economic Times (3/09/09) It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016.3 million units. Product Life Cycle and consumer demand. The domestic two-wheeler sales will grow at a CAGR of 8. have been consistently registering higher growth rates every passing year for their domestic flourishing domestic automobile markets. Yamaha 63% etc. Source: Economic Times Sales of different Auto Companies speed up even before festive season Maruti by 29%. leaving ample opportunity for volume growth.
buses. independence and value offered by automobiles. 3. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. This instinct of the industry is primarily driven by technical capabilities acquired over years of gestation under the technical collaboration with international players. may be high in terms of personal time. The switching cost associated with using a different mode of transportation.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 13 vehicles (trucks. but none offer the utility. FINANCE-II . Threat of Substitutes The threat of substitutes to the automotive industry is fairly mild. Industrial Analysis of any industry can be done based on the following headings: 1. 4. a domestic company. Although the barriers to new companies are substantial. the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. Barriers to entry The barriers to enter automotive industry are substantial. establishing companies are entering the new markets through strategic partnerships or through buying out or merging with other companies. Numerous other forms of transportation are available. tractors). and Three-wheelers. Five Forces Model BCG Matrix Industrial Life Cycle SWOT Analysis Industry Specific Index 1. Two-wheelers.PGDM(2008-10) GROUP-15. has the potential to compete its home market against the global firms who are not well established there. rivalry in the Indian auto sector is intense due to the entry of foreign companies in the market. tempos. convenience and utility. These forces are • Degree of Rivalry Despite the high concentration ratio seen in the automotive sector. Supplier’s power • • • NEW DELHI INSTITUTE OF MANAGEMENT. For a new company. 2. with local knowledge and expertise. passenger cars. convenience.) Five Forces Model Michael Porter identifies five forces that influence an industry. 5. However. Commercial Vehicles. The industry rivalry is extremely high with any being product being matched in a few months by the competitors.
telecom.) BCG Matrix In an economy. the power axis is tipped in the consumers’ favor. pharmacology and retail sectors and these can be placed in the different positions in the matrix as shown below: INDUSTRY BCG MATRIX H igh M a r k e t G r o w t h S TAR QUESTION MARKS Telecom Retai l Softwa re CASH COWS D OGS Banking & AUTOMOBIL ES F MCG Low H Relative market share Low GROUP-15. some of the major sectors are FMCG. steel. the power axis is tipped in industry’s favor. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT. 2. • Buyers’ Power In the relationship between the automotive industry and its ultimate consumers. banking and insurance. there are a number of major industries and they all occupy different positions in the BCG matrix according to their growth and contribution towards the economy.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 14 In the relationship between the industry and its suppliers. automobiles. The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers. software. In the Indian economy. This is due to the fairly standardized nature and the low switching costs associated with selecting from among competing brands. different industries are present and different industries have different growth rate as compared to the growth of the economy. In an economy.PGDM(2008-10) .
Mahindra and Mahindra. STARS Question Marks COMPANY BCG MATRIX H igh M a r k e t G r o w t h TATA Motors Maruti Suzuki Low H igh Relative market share Low NEW DELHI INSTITUTE OF MANAGEMENT. the category of the question marks include the companies with low relative market share and high market growth rate and dogs include the companies who have low relative market share and low market growth rate. Cash Cows.PGDM(2008-10) GROUP-15. the companies are placed in one of the following four categories: Star. FINANCE-II . In the Indian automobile sector. In the Stars we place the companies with high market growth and high market share. cash cows are the companies who have low market growth rate and high relative market share. General motors. In the BCG matrix. Hero Honda and Bajaj auto. in terms of the market growth rate and the market share of the company in the industry.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 15 Mahindra& BCG matrix Mahindra is used to determine the Hero TVS relative position of Bajaj General Mototrs the Auto companies of an industry or Dogs Cash Cows different SBU’s of any institution. Dogs and Question marks. the major players are Maruti Suzuki Limited. Tata Motors.
However.) Industrial Life Cycle The industrial life cycle is a term used for classifying industry vitality over time.66 percent. The Commercial Vehicles segment grew marginally at 4. However. 4. maturity and decline. growth. FINANCE-II .07 percent. The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12. While Medium & Heavy Commercial Vehicles declined by 1. Such an analysis of the strategic environment is referred to as a SWOT analysis.13 percent during April. successful companies can grow at extraordinary rates.63% respect.57 percent and Multi Purpose Vehicles by 21. In the pioneer phase.49 percent and Passenger Carriers declined by 2. and there is high risk of failure. the product market has been established and there is at least some historical guide to ground demand estimates. Industry demand tends to follow the overall economy. the product has not been widely accepted or adopted. growth slows as penetration reaches practical limits.71 percent with sales of Goods Carriers declining drastically by 20. but the scope of growth of the automobile sector is very much possible in India due to the increasing income of the middle class and their income as well as standard of living. Utility Vehicles by 10. As the product matures.17 percent. often at an accelerating rate of sales and earnings growth.93% respect. Business strategies are developing. with motorcycles and electric two wheelers segments declining by 11. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W).March 2008 compared to the last year. so the automobile sector can be very well be said to be in the growth phase.79 percent. The industry is growing rapidly.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 16 3. Indian Automotive Industry is booming with a growth rate of around 15 % annually. Companies began to focus on market share rather than growth.) SWOT Analysis A scan of the internal and external environment is an important part of the strategic planning process. The Indian automobile sector has passed this stage quite successfully. Passenger Cars grew by 11.29 percent. Industry life cycle classification generally groups industries into one of four stages: pioneer. Light Commercial Vehicles recorded a growth of 12. Three Wheelers sales fell by 9. and those external to the firm can be classified as opportunities (O) or threats (T).92 % during this period.64% and 16. Scooters and Mopeds segment grew by 11.PGDM(2008-10) GROUP-15.39 percent in this period. Two Wheelers registered a negative growth rate of 7.90 percent and 44. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy. SWOT analysis of the Indian automobile sector gives the following points: NEW DELHI INSTITUTE OF MANAGEMENT. In the growth phase.
Sectoral Indices are very useful in tracking the movement and performance of particular sector. BSE Auto Index comprises all the major auto stocks in the BSE 500 Index.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 17 Strengths • Large domestic market • Sustainable labor cost advantage • Competitive auto component vendor base • Government incentives for manufacturing plants • Strong engineering skills in design etc Weaknesses • Low labor productivity • High interest costs and high overheads make the production uncompetitive • Various forms of taxes push up the cost of production • Low investment in Research and Development • Infrastructure bottleneck Opportunities • Commercial vehicles: SC ban on overloading • Heavy thrust on mining and construction activity • Increase in the income level • Cut in excise duties • Rising rural demand Threats • Rising input costs • Rising interest rates • Cut throat competition 5. which represent a specific industry sector.) Industry Specific Index Industry specific index also called as sectoral index are those indices. All stocks in a sectoral index belong to that sector only. NEW DELHI INSTITUTE OF MANAGEMENT.PGDM(2008-10) GROUP-15. FINANCE-II . Hence an index like the BSE auto index is made of auto stocks.
But in the beginning of 2009 right from 1st quarter auto industry again start regaining and we saw a tremondous growth in auto industry which never seen before not in india but all over the world. Most of the company even shut down their manufacturing units for more than a week. indian auto industry start picking up growth slowly in the first end of 1st quarter index reaches to its highest in his history. Also no further launches were made in mid or late 2008 and postponed to next year. The demand of 2 and 4 Wheelers start increasing rapidly which also force auto industry to employ more workers to meet demand and with GROUP-15.PGDM(2008-10) .com Above is the Indian Auto Industry Index(BSE) shows the up’s and down’s over the period of 5 years. Intially in 2003 when major giants got listed on stock exchange TATA Motors. production came down because of less demand in the economy. Maruti Suzuki. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT. etc. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point it again start booming and than year on year we saw a up and down movement in the index as lots of new players came in Indian market with foreign colaboration but when 2008 came with global slowdown it brings the demand of automobile so low that index reaches to its lowest in past 5year .AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 18 • BSE AUTO Index 5 Year Chart • Automobile Industry Index at BSE for 5 Year COMPANY Source:Googlefinance. We have also saw a fall in FDI’s in automobile Industry.
compared to 53.3% to 69. what are the policies of government towards the company and how the stake of the company divested among different groups of people. an increase of 41.Maruti Suzuki India Ltd.76 crores compared to Rs. Revenues (net of excise) for the year were Rs. compared to 59.351 units in August 2008 The company's exports increased 156. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT. And this growth of industry will be carry further as festive season still to come. of India no longer has stake in Maruti Udyog. It is the leader in commercial vehicles in each segment. The Profit after Tax for the year was Rs.) COMPANY ANALYSIS (Maruti Suzuki & TATA Motors) The company analysis shows the longterm strenght of the company that what is the financial Position of the company in the market where it stand among its competitors and who are the key drivers of the company. compared to 5.92 crores.7%.33093. reported gross revenue (stand-alone) of Rs.PGDM(2008-10) . both in terms of volume of vehicles sold and revenue earned.2% to 14.187ml.1013. Govt. has sold a total of 84.5% to 69. 12. a year marked by severe demand contraction in the automobile industry. so there is a lot of scope to growth in this industry. what is the future plans of the company.93 crores) in 2008-09.2% by Suzuki of Japan. 18. 2007.7%. a decline of 10.795 units in August 2008. The company's domestic sales in August 2009 increased 29.2576.41 crores in 2007-08.808 vehicles in August 2009. As of May 10. and the world’s second largest bus manufacturer.28% of the company was owned by the Indian government.908 vehicles in the same period of 2008. With this. The Profit before Tax was Rs.629 units. 203. GROUP-15. The turnover for the fiscal 2008-09 stood at Rs.847 units. midsize car and utility vehicle segments. compared to 54.6%. Profile of Maruti Suzuki Tata Motors Limited is India’s largest automobile company.28739. Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors. and 54. and among the top three in passenger vehicles with winning products in the compact. Total passenger car sales in August 2009 increased 30.27 crores (2007-08: Rs.7%.2028. a decline of 50. 25660. a decline of 60.79 crores compared to Rs.583 Million & Profit After Tax at Rs. The company is the world’s fourth largest truck manufacturer.113 vehicles in August 2008.961 vehicles. Profile of Maruti Suzuki Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment.28599.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 19 in the 2nd quarter of FY2009-10 Auto index reaches to its highest ever crossed mark of 6000.1001. Govt.26 crores compared to Rs. Until recently.47 crores in 2007-08. c. of India sold its complete share to Indian financial institutions.
PGDM(2008-10) GROUP-15. EPS = Net income. that is. However recession brought hurdles but both companies have potential to in future as lots of products in grow are NEW DELHI INSTITUTE OF MANAGEMENT.Dividends on Preferred stock Average Outstanding shares The trend shows that Tata’s net profit margin is quite stable until it falls to 3. While the net profit of India’s no. FINANCE-II . Net profit Ratio = (Net profit) × 100 (Net sales) Both giants of Automobile industry shows positive trend Sales Revenue over the past 5year.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 20 • Financial Analysis 1. Financial Statements RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI EPS measures the profit available to the equity shareholders per share.1 car manufacturer Maruti Suzuki shows a negative trend from 2007 onwards. But as trend shows TATA motors have potential so an shareholder expect better in future. the amount that they can get on every share held. Till 2008 both the companies had a rising EPS but in 2009 both of them fall and the effect more on Tata motors as they bought two brands Ford Motors and fall in sales results in low EPS.77 in 2009. Profit margins come down as recession hits economy badly hence sales get reduced and cost get increased very much. But the future prospect for both the company’s profit is higher.
Debt-Equity Ratio= Total Debt Total Equity The current ratio is a convenient and reliable tool for measuring a company's level of liquidity. A high debt to equity ratio suggests that a company has financed its growth mostly via debt. Sometimes the cost of the debt financing may outweigh the return that the company generates on the debt through investment and business activities and can lead to bankruptcy. We see that the debt –equity ratio of TATA motors is very high compared to that of Maruti. Moreover increased demand in foreign market also seems to be a positive signal for better future. Maruti is going very swiftly in this field. A general rule of thumb suggests that the quick ratio should be around 1. The ratio acts as an indication that the firm is able to generate GROUP-15. It means that a lot of debt is used by TATA’s to finance its increased operations. while TATA motors was doing good till 2007. The quick ratio is a very stringent measure of solvency. Maruti is always showing a positive trend as its ratio is always greater than 1 except in 2008. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT.PGDM(2008-10) .AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 21 still to add in their portfolio. but the performance decreased from 2008 onwards as shortage of cash was there and current liabilities and provision increased by Rs800Cr.
the ratio indicates whether the firm is likely to be a going concern. FINANCE-II .) Balance Sheets Maruti Suzuki TATA Motors NEW DELHI INSTITUTE OF MANAGEMENT. Both the companies possess a good ratio but the ratio which is close to 2 is desirable. Dividend Per Share= Total amount of Dividend Share Outstanding a. Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008.PGDM(2008-10) GROUP-15. Maruti is more successful in paying off its liabilities. still both the companies are earning good profit. so we see in graph that Maruti has more strong liquidity than TATA Motors as its current ratio is always greater than 1. even though the fall in dividend in 2009. thus. it always provided dividend of above 10 per share to its shareholders while maruti stick to below 5 per share.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 22 funds to make all needed payments in the future. but the scenario changed in 2009 as both the company’s dividend per share fell. Expansion plans of TATA brought down its cash & Bank Balance and increase of outside liabilities. According to graph TATA’s dividend was much higher than that of Maruti.
) Income Statements Maruti Suzuki TATA Motors NEW DELHI INSTITUTE OF MANAGEMENT.PGDM(2008-10) GROUP-15. FINANCE-II .AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 23 b.
FINANCE-II .PGDM(2008-10) GROUP-15.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 24 • Non-Financial Analysis 1. Share Holding Pattern for Quarter Ended 30-June-09 NEW DELHI INSTITUTE OF MANAGEMENT.
Gopalakrishnan Mr.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 25 Above is the updated share holding pattern of TATA motors which shows that Indian promoter share in the company is 41% that means if they are not in the position to raise further money from general public. Shinzo Hakanishi Mr. General Public also have quite large stake in the company 2. Tata also apparently has its eye on the European and U. N. Amal Ganguli Mr. C. Company already raised huge money by selling their large stake to institutional investors about 27%. S. V. J. Tata Motors. Osamu Suzuki Mr. Tata Motors have announced that they are interested in the idea of designing electric cars. N. R. Being a venture of Japanese company Suzuki big stake of the company is held by foreign promoters which shows that they can divest their part(small part) to raise money in future. Ratan Tata Mr. To take it a step further Tata has also initialized plans for the manufacture of a hybrid car which it will market with Chryster in the U.M.S. D. Manvinder Singh Banga Mr. Keiichi Asai Mr. Bhargava Mr.S perhaps by 2012. Tsuneo Shashi Chairman MD and CEO Director Director Director Director Director Director Director Director Director & Managing Executive Office (Production) Mr. However institutional investors also held 39% major stake in the company but general public have very small part which shows that less presence of share in the secondary market hence low volume trading in stock market. The company hopes to have a version for Europe by 2011 and one for the U. R. K.PGDM(2008-10) . Irani Mr.A. Pallavi Shroff Mr. Brar Mr. Board of Director TATA Motors Chairman Director Director Director Director Director Vice Chairman Director Director Director Director Director Maruti Suzuki Mr.S. Kenichi Ayukawa Mr. Ravi Kant Mr. at least in four-wheeler segment. Mashelkar Mr. Upcoming Ventures & Products TATA Motors Tata Motors is try to be in a position to dominate the Indian Auto industry. S. n Munjee Mr. Shuji Oishi Ms. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT. GROUP-15. R. Palia Mr. Jairath Mr.A. J. Wadia Mr. S. Soonawala Mr. Bhargava Mr. markets. N. After the launch of Nano. Prakash M Telang 3.
towards neighboring Myanmar to boost its sales by setting up a truck manufacturing plant. The upcoming cars in near future by both companies are: TATA Motors Maruti Suzuki Products (CAR) Expected Launch Maruti Grand Vitara Diesel December. The expansion is estimated to cost $ 3.000 cr. Tata Motors is looking east. the overall R&D facilities will be progressively completed by 2015. During the next 3-4 years on capital expenditure and product development. And will introduce world class R&D facilities into India. The upcoming facility.7 lakhs unit per annum from January 2009. FINANCE-II NEW DELHI INSTITUTE OF MANAGEMENT.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 26 is now aiming to launch its cars in Indonesia and is also planning to sell Nano in South America with the help of Fiat. The company plans to increase the number of service stations and workshops to over 3800 from about 2800 currently. is searching options to pump approximately Rs. In a move ahead.500 cr. will see an investment in the range of Rs. Nano. They have also been coming with specific sales promotion programmes targeted at interior regions. After launching the world’s cheapest car. out of which a quarter will be assigned for amplifying leadership network to 1000 in number. As Maruti Suzuki eyes one million sales by 2010. 8. Maruti Suzuki India limited launched the Estilo with all new overall looks and advanced technological features. While the development of the allotted land and construction of the test tracks will be completed in the first phase by 2012. As part of its expansion plans in Southeast Asia. This is a step to increase their sales to one million units as well as for a better position in the Indian auto market. Maruti Suzuki Maruti Suzuki has expanded the capacity at its Manesar plant to 1. 1.2009 Maruti 02 December 2009 Maruti SX4 Diesel December 2009 Maruti Cervo December 2009 Maruti Kizashi December 2009 Maruti xl7 March 2010 GROUP-15. to 1. among them is the “Mera Sapna Meri Maruti: New Panchayati Scheme”.000 one tone pickup trucks a year over the next 3-5 years.PGDM(2008-10) .000 cr. By the year 2010.5 billion. The Haryana government has allotted 700 acres of land to Maruti Suzuki for hi – tech Research & Development complex at Rohtak. Tata Motors had inked a joint venture with Thailand’s Thonburi Auto Assembly’s to manufacture up to 35. Suzuki Motors plan to increase their dealership in India. they have firmed up a massive expansion plan of its service network and plans to expand it to 1700 towns and cities from the current of about 1200. Tata Motors.
subject to approval of the board of directors and of the members by way of a special resolution. commodities. often short-term. The policies adopted by Government will increase competition in domestic market. Implication of DOW THEORY NEW DELHI INSTITUTE OF MANAGEMENT.The goal is to predict probable. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts. FINANCE-II . Though it has an advantage in India. Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto-making subsidiary in India. whom will make India as a production hub and export to nearest market.000 rupees per vehicle from 20. price changes in the investments that they study. The Proposal by the Govt. as this will surely had an impact on the Automobile Industry.) TECHNICAL ANALYSIS Technical analysts track price movements and trading volumes in various securities to identify patterns in the price behavior of particular stocks. mutual funds. Following is the Technical Analysis of TATA Motors & Maruti Suzuki to understand their pattern and behavior of share prices in the market. 2. or options in specific market sectors or in the overall financial markets. which allows them to choose an appropriate trading strategy. This ensured that vehicles produced in India conformed to the standards of the developed world. Government Policies Towards Indian Automobile Industry Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years.PGDM(2008-10) GROUP-15. thanks to low costs and government policies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian auto sector. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products. .000 rupees earlier. motivate many foreign commercial vehicle manufactures to set up shops in India.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 27 Maruti APV Maruti Jimny June 2010 July 2010 4. • • • • • • • Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority foreign equity ownership Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per cent of the paid-up equity capital of the investee company. The announced reduction on the basic customs on bio-diesel is great news for all companies working on environmental saving technologies. Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15.
The second tenet of Dow Theory is that trends have three phases. Public participation and Excess. Accumulati on Public Continuati Exces Upstrea m Correctio n The first tenet of Dow Theory is that the market has three trends. but then started increasing again. In the graph shown above. where rampant speculations occur and the “smart money” starts to exit their positions.PGDM(2008-10) GROUP-15. Uptrends are defined as a time when successive rallies in a security price close at levels higher than those achieved in previous rallies. The accumulation phase is one in which the expert traders are actively taking positions which are against the majority of people in the market. which is when the public at large catches on to what the experts know and begin to trade in the same direction and in the Excess phase. Downtrends. but also price philosophy. NEW DELHI INSTITUTE OF MANAGEMENT.Dow Theory is broken down into six basic tenets. but it then suddenly decreased near the month of June’2009.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 28 The Dow Theory is valid even in today’s volatile and technology driven market. which are defined as when the market makes lower lows and lower highs and Corrections. which are defined as a move after the market makes a move sharply in one direction where the market recedes in the opposite direction before continuing in its original direction. Accumulation. The public participation phase. it is shown that the share prices of Tata motors were increasing in the year 2009. The Dow Theory addresses not only technological analysis and price action. FINANCE-II .
The above graph also illustrates the sixth tenet. In the case of Tata motors. which may be attributed to the news of breach of JLR contract with Ford Motors which may cause Rs. which says that trends exist until definitive signals prove that they have ended. as the market started recovering after December’2008.3bl panelty.PGDM(2008-10) GROUP-15. In the case of Tata motors.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 29 Upstrea m Primary trend Deviati Reaction rally The third tenet of Dow Theory is that the market counts all news. when the prices were decreasing during recession. SENSEX AND TATA MOTORS NEW DELHI INSTITUTE OF MANAGEMENT. The market may show moves which are against the primary trend but this do not mean that the trend is over and the market will normally resume its prior trend. the stock price even increased once. but the market then again followed its prior trend of declining prices. meaning that once news is released it is quickly reflected in the price of an asset. FINANCE-II . The sales of Tata motors decreased by 4% in June end’ 2009 which can be one more reason for the decline in stock prices of Tata motors. the share prices started increasing but they again saw a decline.
AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 30 Tenet four of Dow Theory is that the averages must confirm each other. One thing which very clear is TATA motors react very badly whenever there is a negative sentiments comes in market results SENSEX comes down. when the people stopped investing during recession. prices also increased. that means that the performance of related industries should move in one direction for the health of a particular industry. However. In case of Tata motors. Tenet five is that Trends are confirmed by volume. it is warning that change is in the air. NEW DELHI INSTITUTE OF MANAGEMENT.PGDM(2008-10) GROUP-15. When the performances diverge. Different sets of colored line in above chart prove this fact. prices went down and after recession. when people came back to the market. we can see that the movement of stock prices of Tata motors and SENSEX are more or less in the same direction. and TATA motors also comes down. FINANCE-II .
FINANCE-II . Resistance & Support Level This Technical tool helps in telling that what would be the price band of share price in which it move in near future on the basis of past high and low levels made by a particular scrip.1275 approx. Resistance Level shows the price above which share price will not move in normal case on the other hand Support level shows the minimum share price which can be touched by share or crossing of this share will not be there in normal market condition Following is the Resistance & Support level of Maruti Suzuki & TATA Motors for the period of 2 months: Resistance Level Rs.1425 Support level RS.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 31 1. The above band of resistance and support level shows that the price of shares will move in between this range only until unless any wrong reaction came out in economy or when any correction takes place the prices will move in between this band only.PGDM(2008-10) GROUP-15. NEW DELHI INSTITUTE OF MANAGEMENT.430 approx.490 approx. As it is seen in the past 4 months TATA share price moved up and it keeps making on new level so perfect resistance level for this share is not easy to predict as performance of this share is very good compare to all scrips of this segment. (1-Jul-09 to 7-SeptResistance Level Rs. Support Level Rs.
It is designed to keep you in line with the security's price trend by buying shortly after the security's price bottoms and selling shortly after it tops.PGDM(2008-10) GROUP-15.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 2. Maruti respectively. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. NEW DELHI INSTITUTE OF MANAGEMENT. In the near future both the companies show buy signal as their security prices rises above its moving average. The method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself. so industry as whole is also performing outstanding. Simple Moving Average 32 (50 periods)-Medium Term A Moving Average is an indicator that shows the average value of a security's price over a period of time. So keeping a hold position for the companies would be profitable in future. Yellow area in the graph indicates buy signal and Green area indicates sell signal. It shows that both companies are performing better. FINANCE-II . In above figure we have compare the share price of Tata Motor and Maruti with moving average of 50 period of Tata Motors.
This Tool of 200 Periods tells us about the position of share to buy or sell for a long period say for 9-12 months.PGDM(2008-10) GROUP-15. Yellow area in the graph indicates Buy signal and Green area indicates Sell signal. Long Term Simple Moving Average (200 periods) In the above chart Moving Average is an indicator that shows the average value of a security's price over a period of time. Maruti respectively by taking share prices of 5 year to take out the Moving average for 200 periods.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 33 3. In the near future both the companies show Buy signal NEW DELHI INSTITUTE OF MANAGEMENT. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. FINANCE-II . We have compare the share price of Tata Motor and Maruti with moving average of 200 period of Tata Motors.
A 9-day exponential moving average(EMA). FINANCE-II . here are three popular ways to use the MACD: crossovers.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 34 as their security prices rises above its moving average. Crossovers: Yellow area shows that there was situation when sell position occurred in the end of month June till mid of July as MACD curve below EMA or Signal line shows a sell situation otherwise we saw a buy position of TATA Motors most of the time Light Green area shows that investor want to buy and wan to be in hold position. This shows that an investor can kept a hold position or can buy for longer period of time but as we can see in case of Maruti the moving average line is also rising which shows that Buy n hold position for very long period could be unprofitable a minor correction in the share price can bring down the share price line and then moving average line will easily cross the share price line. The MACD is the difference between a 26-day and 12-day exponential moving average. 4. The trend of buying is seems to be over here or in coming few days and a selling or booking of profit could be seen hence MACD line could fall below EMA in coming time. called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. overbought/oversold.PGDM(2008-10) GROUP-15. MARUTI SUZUKI MACD NEW DELHI INSTITUTE OF MANAGEMENT. and divergences. TATA MOTORS MACD Sell Overboug Overso Buy Above graph shows the MACD of TATA motors for the period of 6 months.
e. For both TATA Motors & Maruti Suzuki Overbought/Oversold: The amount of green lines in above graph on the up side shows the overbought situation by the investor which mean that investor buy more shares at this time and oversold situation occurs when green line is on the downside. a shorter period Moving Average-20 periods) crosses either above a slower Moving Average (i. here Yellow area shows the selling position as MACD line is below EMA line the Light Green area shows the buy position which occur last time in the end of July but now buy position for Maruti is created as EMA or signal line seems to be below MACD line and it will probably continue in near future. Moving Average Crossover A crossover occurs when a faster Moving Average (i.e.PGDM(2008-10) 20 Periods GROUP-15. a longer period Moving Average-50 periods) which is considered a bullish crossover or below which is considered a bearish crossover. Following is the MAC of TATA Motors & Maruti Suzuki to understand the position of both companies average share movement: S NEW DELHI INSTITUTE OF MANAGEMENT. FINANCE-II .C helps in telling buying opportunities when the shorter moving average crosses above the longer moving average and selling opportunities when the shorter moving average crosses below the longer moving average.A.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 35 Overboug Overso Crossover: The above graph shows the MACD of Maruti Suzuki. M. 5.
Below is the MAC graph of Maruti Suzuki for past 6 months in which we haven’t see any sell position till yet the movement of share price is always on the positive side that is increasing so we can say that buying opportunities is always there in case of Maruti Suzuki.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 36 20 Periods B 50 Periods Above is the MAC graph of TATA Motors for the period of 6 months in which ‘S’ denote the selling situation or position whereas ‘B’ is the point after approx 1 month when we saw a bounce back in share prices hence a buy signal occurs which is because. above yellow circle shows that area when price fall below average price and then it move onto lower side. NEW DELHI INSTITUTE OF MANAGEMENT. The increasing trend in the prices after buy signal of shares shows that good amount of profit could be achieved in future if stick with hold position.PGDM(2008-10) GROUP-15. longer moving average of 50 periods cut shorter moving average from the lower side and shows a holding position of shares in coming future also. A move below the moving average suggests that the bears are in control of the price action and that the asset will likely move lower. FINANCE-II . A cross above a moving average suggests that the bulls are is in control and that the price may be getting ready to make a move higher and Maruti Share Prices show that trend of moving up prices.
PGDM(2008-10) GROUP-15. the bands contract. As we can see in the graph is that the at most of the time the graph lies between the middle band and the upper band which shows an increasing price trend in the market and it’s called Riding the Band.) BOLLINGER BAND Bollinger bands are used to measure a market’s volatility. FINANCE-II Maruti . Basically. this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet. and when the market is LOUD. the bands expand.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 37 Bu No Sell Position or Always Position of 6. When the stock is outside the upper end of the Bollinger band it is considered as NEW DELHI INSTITUTE OF MANAGEMENT. TATA Motors On the graph it can be seen the overall trend of the market and quick reference for supply and demand as well as support and resistance areas by using a 20 days moving average and 2 standard deviation in calculating the Bollinger Bands.
An oversold stock has gone down too fast. It’s better to buy stocks when it touches the lower band. and it can assist with timing issues in trading. During the months of April. but in regards all other technical factors should be considered while buying. therefore it becomes an important factor in determining the price trend as it tells that the prices have not fallen very fast in these six months. CONCLUSION NEW DELHI INSTITUTE OF MANAGEMENT. Such levels merely indicate that prices are high or low on a relative basis. May.PGDM(2008-10) GROUP-15. Initially the bands show slight slope and lie approximately parallel to each other. The buy and sell signals are not given when prices reach the upper or lower bands.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 38 ‘OVERBOUGHT’. which means that stock has gone up too fast and when a stock is outside the lower band it is ‘OVERSOLD’. mid July and mid august the stock of TATA motors crossed the upper band which means that during these periods the prices rose very fast. because when price is trading near the upper or lower Bollinger band line. The prices fell too fast and are susceptible to bargain hunting. It’s also seen that the volatility increased to new highs after July because the bands started to widen. FINANCE-II . there is a possibility of trend reversal. i. Knowing whether or not prices are high or low on a relative basis can enhance the interpretation of other indicators. but then onwards the bands started to widen which creates high volatility and looking at the future scenario it may be analysed that the stock will see a fall as at the end of august the band was overbought. The overbought and oversold stocks are apt to reverse course. During the june month the bands contracted very much which shows low volatility.e. this means that the price of the stock is oscillating up and down between the bands through a channel. The stock also shows overbought many times during the six months but it did not show any oversold trend. while in mid of July the stock went below the lower band. A security can become overbought or oversold for an extended period of time.
Like TATA has launch NANO the people’s car and now TATA motors is also planning to come out with an electric car as well as hybrid car. FINANCE-II .g as we seen in last 3-4 months TATA recovers approx.38000) is increasing and national income at the rate of 14. The Indian auto market is still untapped the majority of the people in country don’t own a four wheeler and all the major auto companies are trying to increase their sales by several moves.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 39 Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for FY2009-10 compare to last year growth rate which was just 0.90% after downfall.1425 and that of TATA Motors will move in the range of Rs. whenever there is a negative sentiment in the market regarding TATA Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery in its share prices to regain its primary trend E. By analyzing the current trend of Indian Economy and Automobile Industry we can say that being a developing economy there is lot of scope for growth and this industry still have to cross many levels so there is huge opportunities to invest in and this is proving as more and more foreign Companies setting up there ventures in India. Indian Automobile has a lot of scope for both two wheelers and four wheelers due to development in infrastructure of the country and especially the rural sector in which demand of two wheeler has increased even in recession. According to Indian Statistical Organization the per capita income (Rs. From the Technical Analysis of both companies we come to know that the share price of Maruti will move in the band of Rs. Recommendations NEW DELHI INSTITUTE OF MANAGEMENT.4% which shows potential to buy vehicle in auto industry. 490 if certain correction made in the market.PGDM(2008-10) GROUP-15. The growth rate of Indian Automobile is so fast that by 2016 Indian Industry will be world 7 largest manufacturer in all sections.7% and the above facts and figures in our study also support this truth. 430 to Rs. We have also come to know that share price movement of TATA Motors is just according to the movement of SENSEX.1275 to Rs. moreover in two wheeler segment many companies like Mahindra and Mahindra grow even more than expectations.
FINANCE-II .AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 40 By analyzing the industry on various parameters with the help of implementing Fundamental and Technical tools we came to know that this industry has a lot of potential to grow in future. Through Technical analysis of TATA Motors and Maruti it can be recommended that for now Maruti share price shows that it’s a time to hold the position or buy more shares as there is scope in further rise in share prices until and unless any negative reaction or sentiments comes in the Economy. so at this point of time those who invested earlier can book their profit or new investors can buy now and sell with in short period of time by earning profit in short period of time.PGDM(2008-10) GROUP-15. So recommending to invest in Automobile Industry have no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all around the world. The numbers which came out in the end of financial year 2009 prove that even in the period of recession the overall sales went up is sufficient to support to this fact. as it already went on high side in a very short period of time so holding the shares for long time could be a wrong step. same situation is in two wheeler segment with market leader Hero-Honda a debt free company also have bright future ahead. BIBLIOGRAPHY NEW DELHI INSTITUTE OF MANAGEMENT. as if we take an example of TATA motors it gives approx 90% return in a period of just 3 months while Maruti Suzuki shows always a buy and hold position because there is possibility of growth in future. Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction. The returns which came out of this industry were very impressive recently.
com www.AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY 41 www.com www.rbi.googlefinance.in FDI statistic government of India India Central Statistical Organization Economic Times NEW DELHI INSTITUTE OF MANAGEMENT.yahoofinance.PGDM(2008-10) GROUP-15.com www.in www.com www.worldfact. FINANCE-II .org.moneycontrol.com www.bseindia.co.google.