Auto Index down despite justifiable sales data

December series started-off on a negative note for the Indian stock markets, where traders remained skeptical about the upcoming RBI and US Fed policy reviews. When all sectoral indices had given up, it was Nifty Auto which was positive in the first hour of the trading session on Friday and jumped nearly 1 per cent with robust auto sales numbers.

However, Nifty Auto index witnessed a reversal in the second half, driven by Bajaj Auto and tyre majors like MRF and Apollo Tyres. Moreover, Tata Motors which holds 14 per cent in Nifty Auto fell more than 1 per cent driving the index southwards. Eicher Motors, the owner of Royal Enfield, posted a monthly sales growth of 22 per cent as against November 2016. Ashok Leyland, a tractor maker, posted a total sales growth of 51 per cent. Maruti Suzuki, which holds 21 per cent weightage in Nifty Auto posted 14.1 per cent growth in sales and hit fresh record high. M&M which holds 12 per cent weightage posted 18 per cent growth, but missed street estimates specifically in tractor sales. Bajaj Auto too posted 21 per cent rise.

Nifty Auto index had given a triple top all-time high breakout at 11,246 levels on October 27 and had witnessed a pullback of below 11,246, after hitting a high of 11,518 levels. The index gave a bounce back, but could not sustain and yet again witnessed a sharp pullback with huge volumes and 14-period RSI and stochastic negative crossover.

Friday’s move was driven by the negative market sentiments and hence, going forward the index may take a support at 11100-10070 and bounce back. In that case, we hold 11,245 followed by 11,345 as the major resistance levels.