Post Maruti’s decision to cut production, stock falls for fifth day in a row

On Tuesday, MSIL’s stock closed at Rs 6,816 per share on BSE, 1.35 per cent lower than the previous day’s closing.
Post Maruti’s decision to cut production, stock falls for fifth day in a row

NEW DELHI: Maruti Suzuki India’s (MSIL) decision to cut down its production has not gone down well with investors, as the carmaker’s share prices registered a decline in stock markets for one more trading day. On Tuesday, MSIL’s stock closed at Rs 6,816 per share on BSE, 1.35 per cent lower than the previous day’s closing.

MSIL shares have fallen for the fifth straight session on Tuesday. On Monday, the stock tumbled over 4 per cent intra-day and closed 2.56 per cent lower at Rs 6,910.35. The stock has plunged 22.27 per cent in the last one year as compared to a 13.3 per cent rally in Nifty and a 21.14 per cent fall in the Nifty Auto index.
Industry analysts said that MSIL’s decision to cut down production is a clear indication that demand for passenger vehicles (PV) has slowed down in domestic as well in global markets.

“This announcement is a clear admission of the demand pressures that auto companies have been facing in the last few months. In fact, since the liquidity squeeze that manifested in October last year, the demand for consumer automobiles has been under consistent pressure,” said Amarjeet Maurya, AVP-Mid Caps, Angel Broking. 

Maruti recently decided to cut production of cars by 26 per cent to just 1,26,000 units in March 2019, as compared to 1,72,000 units it manufactured in March 2018.

The exercise by MSIL is looked at as its effort to cut down inventory level with the dealer showrooms. While the recent data released by dealers associations (FADA) said that inventory level of PVs at dealer showrooms is at alarming levels, situation at Maruti showrooms is expected to be not that grim. Experts feel that full production at MSIL will resume in three months.

“Inventory level at MSIL is around 40- 45 days, which is not as bad as others. I think full production at MSIL will resume by July, when election results are announced and markets would be gearing up for festive season. Further, there will be a significant pre-BS-VI buying rush,” said Puneet Gupta, associate director (research), IHS Markit.

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