Maruti Trading Buy Target 1300

Maruti Trading Buy Target 1300

Ø The company had recently saw a loss of production of 40,000 units in the October-December quarter a cost of over $500 million, due to labour unrest at its Manesar plant. Due to which Stock Witnessed huge sell off and even some shorts piled up on the futures

Ø During the same period, it sold 2.11 lakh units as against 2.99 lakh units in the corresponding quarter of last fiscal.

Ø After Seeing the 3Q numbers we Feel worst is over for the stock. Overall company recently launched new compact D’zire (sub 4mts) and Ertiga (MPV) which will help the company to drive the growth hence forth, and witnessing faster-than-industry volume growth.

Ø The company sold a total of 92,161 vehicles in the month of December 2011, down by 7.10% as compared to 99,225 vehicles in December 2010. This includes 14,686 units of exports during the month.

Ø On currency front a weakened rupee, which fell by around a fifth from its high in July, also hurt Maruti's profits by increasing the cost of imports. In an effort to offset rising costs, Maruti followed domestic rivals Mahindra & Mahindra and South Korea's Hyundai Motor with a price increase across its range by up to 3.4 percent last week.

Ø According to Our systems The stock has given a major breakout on the intermediate charts (Weekly time frames).On Jan 17, the stock had a major move up of 10%, on heavy volumes ending the day at 1108 INR. This 1108 level also co-incided with its 200-day moving average. (see the Chart Attached)

Ø From Analyzing Derivatives data The stock has seen Open interest rise 60% in the last 30 days with price having moved almost 25% since. Average delivery volumes in the last few days has increased to 45% as opposed to the earlier average of 25%-30%. The difference in the cash and future prices has slipped into further negative indicating good buying in cash market.

Ø We suggest going LONG on Maruti at CMP with a STOP at 1105.With TARGET of INR :1300