anil mishra sirf

8/6/2019 anil mishra sirf

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INDIAN AUTOMOBILE INDUSTRY

PROJECT REPORT

ON

ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY

Group members-

Anil Kumar 10em01

Chandan Singh 10em04

Gulshan Kumar 10em07

Harsh Gupta10em08

Sambit Gantayat 10em15


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PREFACE

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 ofover 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 Fundamenta

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.


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TABLE OF CONTENT

S.NO. PARTICULARS PAGE NO.

Chapter 1. Executive Summary of the Project

Chapter 2. Objective of the Project

Chapter 3. Analysis of Indian Automobile

Industry

Fundamental Analysisa. Economyb. Industryc. Company

- Financial & Non-Financial

Technical Analysis

a. Share Price Analysisb. Moving Averagec. Moving Average Crossoverd. Bollinger Bande. M.A.C.D

Chapter 4 Conclusion & Recommendations

Chapter 5 Bibliography

Annexure


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EXECUTIVE SUMMARY

The automobile industry, one of the core sectors, has undergone metamorphosis with the advent o

new business and manufacturing practices in the light of liberalization and globalization. The secto

seems to be optimistic of posting strong sales in the couple of years in the view of a reasonabl

surge in demand. The Indian automobile market is gearing towards international standards to mee

the needs of the global automobile giants and become a global hub.

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. An E.I.C approach has been followed under Fundamental Analys

which covered effect of Recession, the impact of inflation, FDIs, Export, GDP etc. on Automobile

Industry. The Industry Analysis has been done with the help of five forces model, BCG Matrix, SWOT

analysis, industry life cycle and the industry specific index. 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 Indias largest Car manufacturer. The fundamental aspect consists financia

and Non-Financial analysis of both the company. In the Technical aspect we have considered Share

price analysis, moving average, moving average crossover, Bollinger bands and M.A.C.D. 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.


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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.

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 industrys and companys prospects

Comparative analysis of two tough competitors TATA Motors and Maruti Suzuki

Application of various Technical Tools and Fundamental tools (like Financial

and Non-financial statements).

ANALYSIS OF AUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile industry has been driving its own growth

through phases. With comparatively higher rate of economic growth rate index against that of great glob

powers, India has become a hub of domestic and exports business. The automobile sector has been

contributing its share to the shining economic performance of India in the recent years.

To understand this industry for the purpose of investment we need to analyze it byfollowing two approaches:

1). Fundamental Analysis (E.I.C Approach)

a.Economy

b. Industry

c.Company

2).Technical Analysis


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1) FUNDAMENTAL ANALYSIS

a). ECONOMY

Economic analysis is the analysis of forces operating the overall economy a country. Economic

analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic

analysis is important in order to understand exact condition of an economy.

GDP and Automobile Industry

In absolute terms, India is 16th in the world in terms of

nominal factory output. The service sector is

growing rapidly in the past few years. This is the pie- chart

showing contributions of different sectors in Indian economy.

The per capita Income is near about Rs38,000 reflecting

improvement in the living standards of an average Indian.

Today, automobile sector in India is one of the key sectors of the economy in terms of the employmenDirectly and indirectly it employs more than 10 million people and if we add the number of peop

employed in the auto-component and auto ancillary industry then the number goes even higher.

As the world economy slips into recession hitting the demand hard and the banking sector takes conservativ

approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 per


cent for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr. Montek Singh (PlanningCommission of India). Following is the graph showing a trend of Indian GDP trend in past 3 years.

Source:India Central Statistical Organization

The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is near abo

5% and will be double by 2016. The automotive industry in India grew at a computed annual growth ra

(CAGR) of 11.5 percent over the past five years, but growth rate in last FY2008-09 was only 0.7% w

passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21.7%.

Recession


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All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of thyear, industry had to face the hard truth and witnessed the fall in sales compared to last year. InDecember 2008, overall production fell by 22 % over the same month last year. Globalrecession has hit the Indian auto industry, India is strong and growing industry but the impact orecession is evident now on industry as sales & growth of automobile companies have declinedPassenger Vehicles segment registered negative growth.

One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13.86over December 2007 Two Wheelers registered minor growth of 1.85 % during April Decemb2008. However, Two Wheelers sales recorded 15.43 percent fall in December 2008 over the sammonth last year. Although the sector was hit by economic slowdown, overall production (passengvehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 millvehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased marginafrom 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to 8.41 million. Tonumber of vehicles sold including passenger vehicles, commercial vehicles, two-wheelers and threwheelers in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.

InflationDespite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of sales in au

sector. A moderate amount of inflation is important for the proper growth of an economy like Indbecause it attracts more private investment. The fall in wholesale prices from a year earlier is mainly d

to a statistical base effect and doesnt suggest contraction in demand, the Reserve Bank of India said fe

week back, while revising its inflation forecast for the FY through March to around 5% from 4%.

In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20per barrel five years back), Indian automobile Industry was not as much affected and experts thinthat Indian automobile industry will continue to grow this year despite all obstacles- oil price hikehigher interest rates. However, the effect of inflation has affected every sector which is related tocar manufacturing and production. The increase in the price of fuel and the steel due to inflation haled to a slower growth rate of the car industry in India. 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 rawmaterials to build a car. The car market and the car industry witnessed a fall of 8-9%.

FDIs

In India FDI up to 100 percent, has been permitted under automatic route to this sector, which haled to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto partindustry. India enjoys a cost advantage with respect to casting and forging as manufacturing costin India are 25 to 30 per cent lower than their western counterparts the Investment Commission haset a target of attracting foreign investment worth US$ 5 billion for the next seven years to increasIndia's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent by2015. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25% compare

to 2007-08, while in April-May 2009 it was around Rs.497 Cr.Source- FDI Statistics Govt. of

India

Foreign Exchange

India holds the third largest stockof reserves among the emergingmarket economies after China andRussia. The overall approach tothe management of India's


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foreign exchange reserves inrecent years reflects the changingcomposition of the balance ofpayments and the 'liquidity risks'associated with different types of

flows and other requirements. Source: rbi.org.in

Taking these factors into account, India's foreign exchange reserves continued to be at

comfortable level and consistent with the rate of growth, the share of external sector in theeconomy and the size of risk-adjusted capital flows. Following is the table shows the trend oforeign reserves held by central bank in last FY. Reserves came down cause of recession aover the world however India still able to maintain its reserves hence a minor fall was seencompare to all other country which shows great strength in long-term for Indian EconomyIncrease in Exports specially from auto industry shows an expectations of huge income fromwestern countries and new $200 bl. target for exports by 2011 helps in increasing.


1.FCA (Foreign Currency Assets): FCAs are maintained as a multicurrency portfolio comprising ajor currencies,

US dollar, Euro, Pound sterling, Japanese yen, etc. and is valued in terms of US dollars.2. SDR (Special Drawing Rights): Values in SDR have been indicated in parentheses.

3. Gold: Physical stock has remained unchanged at approximately 357 tonnes.

4. RTP refers to the Reserve Tranche Position in the IMF.

Export

Society of Indian Automobile Manufacturers (SIAM), automobile sales (including passengevehicles, commercial vehicles, two-wheelers and three-wheelers) in the overseas marketincreased to 1.53 million units in 2008-09 from 1.23 million units in 2007-08. Export o

passenger vehicles increased from 218,401 in 2007-08 to 335,739 units in 2008-09.

There is a continuous increase in the export of automobiles since the financial year 2002-03except for the decline in the export of commercial vehichles in the financial year 2008-09, whichmay be attributed to the global economic recession.


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Despite recession, the Indian automobile market continues to perform better than most of theother industries in the economy in coming future, more and more MNCs coming in India tosetup their ventures which clearly shows the scope of expansion.

Current Scenario of Automobile Industry in Economy

With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in ne

future, Two wheeler segment sales grew up by 12.8% with the modest 2.6% growth rate, under th

segment the market leader Hero Honda registered growth of 12% in its domestic sales where

Bajaj Auto disappointed as sales plunging by 23%, on the other hand car sales has been grew up a healthy 22.7% in last February and Commercial Vehicles reported slower sales. It is assumed th

in coming festive season to meet demand, carmakers going to produce 70000units/month more ov

the average 1.3lac/month with help of 5000 new hands. Source: Economic


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.

Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact carsection of car market in India. Source: Economic TimesSales of different Auto Companies speed up even before festive season Maruti by 29%, TATAby 11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc.

Source: Economic Times(3/09/09)

It is expected that the Automobile Industry in India would be the 7th largest automobilemarket within the year 2016.

Projected Growth rate in Automobile Industry

Passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.7million units by 2014.

The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million un

To emerge as the destination of choice in the world for design and manufacture of automobile

and auto components with output reaching a level of US$ 145 billion accounting for more than 10% o

the GDP and providing additional employment to 25 million people by 2016.

b.) INDUSTRY ANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the developed countries theautomobile industries are stagnating as a result of drooping markets, whereas the automobilindustry in the developing nations, have been consistently registering higher growth rates everypassing year for their domestic flourishing domestic automobile markets.


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Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the

nature of competition, Product Life Cycle and consumer demand. The industry is at the crossroads wit

global mergers and relocation of production centers to emerging developing countries.

In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian

automobile sector is far from being saturated, leaving ample opportunity for volume growth.

Segmentation of Automobile Industry

The automobile industry comprises of Heavy

vehicles (trucks, buses, tempos, tractors);

passenger cars; Two-wheelers; Commercial

Vehicles; and Three-wheelers. Following is

the segmentation that how mucheach sector comprises of whole

Indian Automobile Industry.

Industrial Analysis of any industry can be done based on the following headings:

1. Five Forces Model

2. BCG Matrix

3. Industrial Life Cycle

4. SWOT Analysis5. Industry Specific Index

1.) Five Forces Model

Michael Porter identifies five forces that influence an industry. These forces are

Degree of Rivalry

Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto

sector is intense due to the entry of foreign companies in the market. The industry rivalry is

extremely high with any being product being matched in a few months by the competitors.This instinct of the industry is primarily driven by technical capabilities acquired over years of

gestation under the technical collaboration with international players.

Threat of Substitutes

The threat of substitutes to the automotive industry is fairly mild. Numerous other formof transportation are available, but none offer the utility, convenience, independenceand value offered by automobiles. The switching cost associated with using a differenmode of transportation, may be high in terms of personal time, convenience and utility.


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Barriers to entry

The barriers to enter automotive industry are substantial. For a new company, the startup capita

required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive

Although the barriers to new companies are substantial, establishing companies are entering th

new markets through strategic partnerships or through buying out or merging with other companies

However, a domestic company, with local knowledge and expertise, has the potential to compete it

home market against the global firms who are not well established there.

Suppliers powerIn the relationship between the industry and its suppliers, the power axis itipped in industrys favor. The industry is comprised of powerful buyers whoare generally able to dictate their terms to the suppliers.

Buyers Power

In the relationship between the automotive industry and its ultimate consumers

the power axis is tipped in the consumers favor. This is due to the fairl

standardized nature and the low switching costs associated with selecting from

among competing brands.

2.) BCG Matrix

In an economy, different industries are present and different industries have differengrowth rate as compared to the growth of the economy. In an economy, there are anumber of major industries and they all occupy different positions in the BCG matriaccording to their growth and contribution towards the economy. In the Indiaeconomy, some of the major sectors are FMCG, automobiles, banking and insurance

steel, telecom, software, pharmacology and retail sectors and these can be placed ithe different positions in the matrix as shown below:


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INDUSTRY BCG MATRIX

H S QUESTION

Banking

M&

Telecom

aAUTOMOBIL Retair

kSoftwae

t

G CASH Dr

Fo

w

t

h

Low

H LowRelative market

share


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3.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle

classification generally groups industries into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or adopted. Business strategie

are developing, and there is high risk of failure. However, successful companies can grow a

extraordinary rates. The Indian automobile sector has passed this stage quite successfully.

In the growth phase, the product market has been established and there is at least some historicalguide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate ofsales and earnings growth . Indian Automotive Industry is booming with a growth rate of around 15% annually. The cumulative growth of the Passenger Vehicles segment during April 2007 March2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percentand Multi Purpose Vehicles by 21.39 percent in this period. The Commercial Vehicles segment

grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fellby 9.71 percent with sales of Goods Carriers declining drastically by 20.49 percent and Passenger

Carriers declined by 2.13 percent during April- March 2008 compared to the last year. TwoWheelers registered a negative growth rate of 7.92 % during this period, with motorcycles andelectric two wheelers segments declining by 11.90percent and 44.93% respect. However, Scootersand Mopeds segment grew by 11.64% and 16.63%

respect. The growth rate of the automobile industryin India is greater than the GDP growth rate of theeconomy, so the automobile sector can be very wellbe said to be in the growth phase.

As the product matures, growth slows as penetration reaches practical limits. Companies began

to focus on market share rather than growth. Industry demand tends to follow the overall economy,

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.


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4.) SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planningprocess. Environmental factors internal to the firm usually can be classified as strengths (S) oweaknesses (W), and those external to the firm can be classified as opportunities (O) or threat(T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOTanalysis of the Indian automobile sector gives the following points:


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.) Industry Specific Index

Industry specific index also called as sectoral index are those indices, which represent aspecific industry sector. All stocks in a sectoral index belong to that sector only. Hence an indelike the BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking thmovement and performance of particular sector.

BSE Auto Index comprises all the major auto stocks in the BSE 500 Index.


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BSE AUTO Index 5 Year Chart

Automobile Industry Index at BSE for 5 Year

COMPANY

Source:Googlefinance.com

Above is the Indian Auto Industry Index(BSE) shows the ups and downs over the period of 5 years

Intially in 2003 when major giants got listed on stock exchange TATA Motors, Maruti Suzuki, etc. india

auto industry start picking up growth slowly in the first end of 1 st quarter index reaches to its highest i

his history. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point

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

brings the demand of automobile so low that index reaches to its lowest in past 5year . Most of th

company even shut down their manufacturing units for more than a week, production came dow

because of less demand in the economy. Also no further launches were made in mid or late 2008 an

postponed to next year. We have also saw a fall in FDIs in automobile Industry. But in the beginning o

2009 right from 1st quarter auto industry again start regaining and we saw a tremondous growth in aut

industry which never seen before not in india but all over the world. The demand of 2 and 4 Wheeler

start increasing rapidly which also force auto industry to employ more workers to meet demand and with

in the 2nd

quarter of FY2009-10 Auto index reaches to its highest ever crossed mark of 6000. Agrowth of industry will be carry further as festive season still to come, so there is a lot of scope

to growth in this industry.

c.) COMPANY ANALYSIS (Maruti Suzuki & TATA Motors)

The company analysis shows the longterm strenght of the company that what is the financial Position o

the company in the market where it stand among its competitors and who are the key drivers of th

company, what is the future plans of the company, what are the policies of government towards th

company and how the stake of the company divested among different groups of people.

Profile of Maruti Suzuki


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Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in thecar segment, both in terms of volume of vehicles sold and revenue earned. Until recently,18.28% of the company was owned by the Indian government, and 54.2% by Suzuki ofJapan. As of May 10, 2007, Govt. of India sold its complete share to Indian financialinstitutions. With this, Govt. of India no longer has stake in Maruti Udyog.

The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit After Tax at Rs. 12,187ml.Maruti

Suzuki India Ltd. has sold a total of 84,808 vehicles in August 2009, an increase of 41.6%, compared to

59,908 vehicles in the same period of 2008. The company's domestic sales in August 2009 increased 29.3%

to 69,961 vehicles, compared to 54,113 vehicles in August 2008. Total passenger car sales in August 2009

increased 30.5% to 69,629 units, compared to 53,351 units in August 2008 The company's exports

increased 156.2% to 14,847 units, compared to 5,795 units in August 2008.

Profile of Maruti Suzuki

Tata Motors Limited is Indias largest automobile company, reported gross revenue (stand-alone) ofRs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year marked by severe demand

contraction in the automobile industry. Revenues (net of excise) for the year were Rs. 25660.79

crores compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The Profit before Tax was

Rs.1013.76 crores compared to Rs.2576.47 crores in 2007-08, a decline of 60.7%. The Profit after

Tax for the year was Rs.1001.26 crores compared to Rs.2028.92 crores, a decline of 50.7%.

It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles

with winning products in the compact, midsize car and utility vehicle segments. The company is the

worlds fourth largest truck manufacturer, and the worlds second largest bus manufacturer.

Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.

Financial Analysis

1. Financial Statements

RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI


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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, Company already raised huge

money by selling their large stake to institutional

investors about 27%. General Public also have

quite large stake in the company

2. Board of DirectorTATA Motors

Mr. Ratan Tata ChairmanMr. N.A. Soonawala Director Mr. R. Gopalakrishnan DirectorMr. S.M. Palia DirectorMr. S. Bhargava DirectorMr. V. K. Jairath DirectorMr. Ravi Kant Vice ChairmanMr. J. J. Irani DirectorMr. N. N. Wadia DirectorMr. R.A. Mashelkar Director

Mr. n Munjee Director Mr. Prakash M Telang Director

3. Upcoming Ventures & Products

TATA Motors

Being a venture of Japanese company Suzuki bi

stake of the company is held by foreign promoter

which shows that they can divest their part(sma

part) to raise money in future. Howeve

institutional investors also held 39% major stak

in the company but general public have very sma

part which shows that less presence of share i

the secondary market hence low volume tradin

in stock market.

Maruti Suzuki

Mr. R. C. Bhargava ChairmanMr. Shinzo Hakanishi MD and CEO

Mr. Manvinder Singh Banga Director

Mr. Amal Ganguli Director Mr. D. S. Brar Director

Mr. Keiichi Asai Director

Mr. Osamu Suzuki Director

Mr. Shuji Oishi Director

Ms. Pallavi Shroff Director Mr. Kenichi Ayukawa Director

Mr. Tsuneo Shashi Director &ManagingExecutive

Office (Production

Tata Motors is try to be in a position to dominate the Indian Auto industry, at least in four-

wheeler segment. Tata Motors have announced that they are interested in the idea of

designing electric cars. 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.S.After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The company

hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012. Tata Mo


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is now aiming to launch its cars in Indonesia and is also planning

to sell Nano in South America with the help of Fiat. After

launching the worlds cheapest car, Nano, Tata Motors is looking

east, towards neighboring Myanmar to boost its sales by setting

up a truck manufacturing plant. As part of its expansion plans in

Southeast Asia, Tata Motors had inked a joint venture with

Thailands Thonburi Auto Assemblys to manufacture up to

35,000 one tone pickup trucks a year over the next 3-5 years.Tata Motors, is searching options to pump approximately Rs.

8,000 cr. During the next 3-4 years on capital expenditure and

product development.

Maruti Suzuki

Maruti Suzuki has expanded the capacity at its Manesar plant

to 1.7 lakhs unit per annum from January 2009. By the year

2010, Suzuki Motors plan to increase their dealership in India.

This is a step to increase their sales to one million units as

well as for a better position in the Indian auto market. The

expansion is estimated to cost $ 3.5 billion, 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, 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.

The company plans to increase the number of service stations and

workshops to over 3800 from about 2800 currently. They have

also been coming with specific sales promotion programmes

targeted at interior regions, among them is the Mera Sapna Meri

Maruti: New Panchayati Scheme. The Haryana government has

allotted 700 acres of land to Maruti Suzuki for hi tech Research

& Development complex at Rohtak. The upcoming facility, will see

an investment in the range of Rs. 1,000 cr. to 1,500 cr. And will

introduce world class R&D facilities into India. While the

development of the allotted land and construction of the test tracks

will be completed in the first phase by 2012, the overall R&D

facilities will be progressively completed by 2015.

In a move ahead, Maruti Suzuki India limited launched

the Estilo with all new overall looks and advanced

technological features.

The upcoming cars in near future by both companies are:


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Automatic approval for foreign equity investment upto100% of manufacture of automobiles and component ispermitted

FIIs including overseas corporate bodies (OCBs) andNRIs are permitted to invest up to 49 per cent of the paid-upequity capital of the investee company, subject to approval ofthe board of directors and of the members by way of a specialresolution. .

Investments in making auto parts by a foreign vehicle maker

will also be considered a part of the minimum foreign investmentmade by it in an auto-making subsidiary in India. The move is aimedat helping India emerge as a hub for


Primary

Deviati

Upstrea

Reaction


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The third tenet of Dow Theory is that the market counts all news, meaning that once news is

released it is quickly reflected in the price of an asset.

In the case of Tata motors, as the market started recovering after December2008, the share prices sta

increasing but they again saw a decline, which may be attributed to the news of breach of JLR contractwith Ford Motors which may cause Rs.3bl panelty. 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 above graph also illustrates the sixth tenet, which says that trends exist until definitive signals

prove that they have ended. 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.

In the case of Tata motors, when the prices were decreasing during recession, the stock price even

increased once, but the market then again followed its prior trend of declining prices.

SENSEX AND TATA MOTORSTenet four of Dow Theory is that the averages must confirm each other, that means that the

performance of related industries should move in one direction for the health of a particular

industry. When the performances diverge, it is warning that change is in the air. However, we

can see that the movement of stock prices of Tata motors and SENSEX are more or less in

the same direction. One thing which very clear is TATA motors react very badly wheneverthere is a negative sentiments comes in market results SENSEX comes down, and TATA

motors also comes down. Different sets of colored line in above chart prove this fact.


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Tenet five is that Trends are confirmed by volume. In case of Tata motors, when the people

stopped investing during recession, prices went down and after recession, when people came

back to the market, prices also increased.

1. Resistance & Support Level

This Technical tool helps in telling that what would be the price band of share price in which itmove in near future on the basis of past high and low levels made by a particular scrip.

Resistance Level shows the price above which share price will not move in normal case onthe other hand Support level shows the minimum share price which can be touched by shareor crossing of this share will not be there in normal market condition Following is theResistance & Support level of Maruti Suzuki & TATA Motors for the period of 2 months:

ResistanceLevel

Rs.1425

Support levelRS.1275 approx.

(1-Jul-09 to 7-Sept-

ResistanceLevelRs.490 approx.

Support Level

Rs.430 approx.

As it is seen in the past 4 mont


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TATA share price moved up and

keeps making on new level so perfe

resistance level for this share is n

easy to predict as performance of th

share is very good compare to

scrips of this

segment.

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 anycorrection takes place the prices will move in between this band only.

2. Simple Moving Average(50 periods)-Medium Term

Moving Average is an indicator that shows the average value of a security's price over a period of time. 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. In above figure we have compare the share price of Tata

Motor and Maruti with moving average of 50 period of Tata Motors, Maruti respectively.

A buy signal is generated when the security's price rises above its moving average and a sell signal isgenerated when the security's price falls below its moving average. It is designed to keep you in lin

with the security's price trend by buying shortly after the security's price bottoms and selling shortly afte

it tops. Yellow area in the graph indicates buy signal and Green area indicates sell signal. In the nea

future both the companies show buy signal as their security prices rises above its moving average.

shows that both companies are performing better, so industry as whole is also performing outstanding

So keeping a hold position for the companies would be profitable in future.


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3. Long Term Simple Moving Average (200 periods)

In the above chart Moving Average is an indicator that shows the average value of a security'sprice over a period of time. We have compare the share price of Tata Motor and Maruti withmoving average of 200 period of Tata Motors, Maruti respectively by taking share prices of 5year to take out the Moving average for 200 periods. 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.

A buy signal is generated when the security's price rises above its moving average and a sell signal i

generated when the security's price falls below its moving average. Yellow area in the graph indicate

Buy signal and Green area indicates Sell signal. In the near future both the companies show Buy signa

as their security prices rises above its moving average. This shows that an investor can kept ahold position or can buy for longer period of time but as we can see in case of Maruti themoving average line is also rising which shows that Buy n hold position for very long periodcould be unprofitable a minor correction in the share price can bring down the share price linand then moving average line will easily cross the share price line.


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4. TATA MOTORS MACD

Sell

OverbougOverso Buy

Above graph shows the MACD of TATA motors for the period of 6 months. The MACD is the differencebetween a 26-day and 12-day exponential moving average. A 9-day exponential moving average(EMA)

called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. here are

three popular ways to use the MACD: crossovers, overbought/oversold, and divergences.

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. 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.


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6.) BOLLINGER BAND

Bollinger bands are used to measure a markets volatility. Basically, this little tool tells uwhether the market is quiet or whether the market is LOUD! When the market is quiet, thbands contract; and when the market is LOUD, the bands expand.

TATA Motors

On the graph it can be seen the overall trend of the market and quick reference for supply and demand a

well as support and resistance areas by using a 20 days moving average and 2 standard deviation i

calculating the Bollinger Bands. As we can see in the graph is that the at most of the time the graph lie

between the middle band and the upper band which shows an increasing price trend in the market and itcalled Riding the Band. When the stock is outside the upper end of the Bollinger band it is considered as

OVERBOUGHT, which means that stock has gone up too fast and when a stock is outside thlower band it is OVERSOLD. An oversold stock has gone down too fast. During the months oApril, May, mid July and mid august the stock of TATA motors crossed the upper band whichmeans that during these periods the prices rose very fast, while in mid of July the stock went belowthe lower band, i.e. The prices fell too fast and are susceptible to bargain hunting. The overboughand oversold stocks are apt to reverse course. Its also seen that the volatility increased to newhighs after July because the bands started to widen. Its better to buy stocks when it touches thlower band, but in regards all other technical factors should be considered while buying.


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Initially the bands show slight slope and lie approximately parallel to each other, this meansthat the price of the stock is oscillating up and down between the bands through a channel. Thstock also shows overbought many times during the six months but it did not show anyoversold trend, therefore it becomes an important factor in determining the price trend as it tellsthat the prices have not fallen very fast in these six months. During the june month the bandcontracted very much which shows low volatility, but then onwards the bands started to widewhich creates high volatility and looking at the future scenario it may be analysed that the stockwill see a fall as at the end of august the band was overbought, because when price is tradingnear the upper or lower Bollinger band line, there is a possibility of trend reversal.

The buy and sell signals are not given when prices reach the upper or lower bands. Such levels merely

indicate that prices are high or low on a relative basis. A security can become overbought or oversol

for an extended period of time. Knowing whether or not prices are high or low on a relative basis ca

enhance the interpretation of other indicators, and it can assist with timing issues in trading.

CONCLUSIONIndian Automobile Industry is in the growth phase and the expected growth rate is 9-10% fo

FY2009-10 compare to last year growth rate which was just 0.7% and the above facts and

figures in our study also support this truth.

Indian Automobile has a lot of scope for both two wheelers and four wheelers due t

development in infrastructure of the country and especially the rural sector in which demand o

two wheeler has increased even in recession. According to Indian Statistical Organization th

per capita income (Rs.38000) is increasing and national income at the rate of 14.4% whicshows potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fas

that by 2016 Indian Industry will be world 7 largest manufacturer in all sections.

The Indian auto market is still untapped the majority of the people in country dont own a fou

wheeler and all the major auto companies are trying to increase their sales by several moves

Like TATA has launch NANO the peoples car and now TATA motors is also planning to come

out with an electric car as well as hybrid car, moreover in two wheeler segment man

companies like Mahindra and Mahindra grow even more than expectations.

From the Technical Analysis of both companies we come to know that the share price of Marut

will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range o

Rs. 430 to Rs. 490 if certain correction made in the market.

We have also come to know that share price movement of TATA Motors is just according to the movement o

SENSEX, whenever there is a negative sentiment in the market regarding TATA Motors there is a steep fa

in the stock price of TATA Motors but we have seen quick recovery in its share prices to regain its primar

trend E.g as we seen in last 3-4 months TATA recovers approx.90% after downfall.

By analyzing the current trend of Indian Economy and Automobile Industry we can say tha


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being a developing economy there is lot of scope for growth and this industry still have to cros

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.

Recommendations

By analyzing the industry on various parameters with the help of implementing Fundamental an

Technical tools we came to know that this industry has a lot of potential to grow in future. Sorecommending to invest in Automobile Industry have no doubt is going to be a good and smar

option because this industry is booming like never before not only in India but all around the world

The returns which came out of this industry were very impressive recently, as if we take an example

of TATA motors it gives approx 90% return in a period of just 3 months while Maruti Suzuki show

always a buy and hold position because there is possibility of growth in future, same situation is in

two wheeler segment with market leader Hero-Honda a debt free company also have bright futur

ahead. The numbers which came out in the end of financial year 2009 prove that even in the perio

of recession the overall sales went up is sufficient to support to this fact. Through Technica

analysis of TATA Motors and Maruti it can be recommended that for now Maruti share price show

that its a time to hold the position or buy more shares as there is scope in further rise in shar

prices until and unless any negative reaction or sentiments comes in the Economy.

Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors ther

is a chance of getting correction, 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, 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.

BIBLIOGRAPHY

www.bseindia.com

www.googlefinance.com

www.yahoofinance.com

www.google.co.in

www.moneycontrol.com

www.worldfact.com

www.rbi.org.in

FDI statistic government of India

India Central Statistical Organization

Economic Times


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Documents

anil mishra sirf