Auto stocks gain after Morgan Stanley says cost pressure is easing

    Auto stocks gain after Morgan Stanley says cost pressure is easing
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    By CNBCTV18.com  IST (Updated)

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    Automobile stocks: Shares of automobile companies were trading higher on Friday. This was after Morgan Stanley said it is constructive about the volume outlook across segments in the automobile sector, while adding that the cost pressure is easing.

    Automobile stocks such as TVS Motor, Hero MotoCorp, Mahindra and Mahindra, Eicher, Tata Motors and Maruti Suzuki were trading well above the flatline on Friday after Morgan Stanley said cost pressures are easing.
    At 10:16 am, Nifty Auto was up 1.4 percent.
    Morgan Stanley is constructive about the volume outlook across segments in the automobile sector. The foreign brokerage firm said that the automobile companies have taken price hikes but cost pressure is easing.
    Several industries are bearing the brunt of the surge in metal and commodity prices, which had prompted companies to pass on some part of the higher input costs to customers.
    The brokerage firm is ‘overweight’ on Maruti Suzuki India, Ashok Leyland, Tata Motors, Mahindra and Mahindra, and Eicher Motors, while has an ‘underweight’ stance on Amara Raja Batteries, TVS Motor Company, and Hero MotoCorp.
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    Morgan Stanley has an ‘equal-weight’ recommendation on Bajaj Auto and Samvardhana Motherson International.
    Meanwhile, Babudeb Banerjee of ICICI Securities told CNBC-TV18 during an interaction that he foresees consensus earnings upgrade for automobile companies.
    However, he does not expect any decline in vehicle prices owing to a strong demand outlook. He pointed out that retail demand is strong, especially in passenger vehicles.
    Banerjee said he was positive about Maruti Suzuki India even at current levels as he sees the carmaker benefiting from new launches, a cool-off in raw material prices, and a weaker yen. Besides, he also likes TVS Motor as he believes the company will grow faster than the two-wheeler industry.
    Besides, news that Maruti Suzuki India and Toyota will start production of a new SUV model from August. Both companies will market the product under respective brands. Shares of Maruti Suzuki were up 0.2 percent.
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