Bloomberg News

Bearish Bets on Suzuki India Unit Near 8-Month High on Sales

January 23, 2012

Jan. 20 (Bloomberg) -- Futures traders are the most bearish on Suzuki Motor Corp.’s Indian unit in eight months on concerns higher borrowing costs and increased competition from rivals will damp sales.

Maruti Suzuki India Ltd.’s futures settled at 1,116.4 rupees yesterday in Mumbai, a 13.6-point discount to the underlying stock that’s near the widest since May, data compiled by Bloomberg show. Open interest totaled 11,632, near a two- month high, the data show.

Maruti, which sells almost half the cars in the country, said Jan. 2 that total sales for the April to December period slid 17 percent to 773,361 units as a record run of increases in funding costs cooled consumer demand and a workers strike in November disrupted output. The company may next week report the smallest quarterly net income in three years, according to the median estimate of 25 analysts in a Bloomberg survey.

“Falling monthly sales will continue to be a drag on the stock going forward,” Siddarth Bhamre, head of derivatives at Angel Broking Ltd., said by phone from Mumbai. The stock price may drop as much as 10 percent from current levels, he said.

Maruti shares rose 2.6 percent to 1,129.95 rupees at the 3:30 p.m. close yesterday, set for a 16 percent gain this week, after the company raised prices. The stock still has the lowest consensus rating among four-wheeler producers in the 30-member BSE India Sensitive Index, data compiled by Bloomberg show. The stock sank 35 percent in 2011, its biggest loss in three years.

“Cash-based buying by long funds is supporting the stock currently but there is not much support for futures,” Angel’s Bhamre said, adding he advised clients to take short positions, or bets prices will fall, after the current rally plays out.

Fuel Costs

Passenger-car sales in Asia’s third-biggest economy shrank 2 percent in the April-December period, from a 32 percent gain a year earlier, as record gasoline prices and higher interest rates damped demand for cars in a nation where about 80 percent of purchases are funded by loans, data from the Society of Indian Automobile Manufacturers show. SIAM previously called for sales growth of between 2 percent and 4 percent in October.

The company may say Jan. 23 profit in the quarter ended in December plunged 61 percent to 2.22 billion rupees ($44 million) from a year ago, according to the Bloomberg survey. Net income sank 60 percent to 2.4 billion rupees in the September quarter.

--Editors: Ravil Shirodkar, Joanna Ossinger

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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