Recent Demonetization has left most Industries in a lurch bringing a crunch and dip due to lower liquidity in the market. The winners in an unforeseen charge against black money, are the e-wallet segment, online payment portals as well as e-service providers which are complimenting the banks to keep the economy afloat by aiding major business transactions. Sectors like Pharma,Hospitals,Government Institutions are prepped for the challenge but some cash heavy sectors are seeing a sudden slide. Demonitisation has been done for the second time in India since 1978. Nexensus explores the recent effect of demonetisation on stock performance of automobile industry.
Stock Prices Plunge
We analyzed the performance of top ten players the in auto segment (2/3/4 wheelers) during the last two weeks since demonetisation came into effect on 8th November to find stock prices of all automotive players have plunged.
|Top Ten Auto Players||Stock Price Before Demonetisation||Stock Price Last Close||Fall in Stock price|
|Eicher Motors Ltd||23951.95||21765||2186.95
|Maruti Suzuki India Ltd||5714.65||4960.2||754.45
|Hero Motocorp Ltd||3282.95||2940||342.95
|Bajaj Auto Ltd.||2813.35||2574.6||238.75
|Mahindra & Mahindra Ltd||1372.45||1239.05||133.4
|Atul Auto Ltd||477.45||413.55||63.9
|Tata Motors Ltd||512.1||471||41.1
|Tvs Motor Company Ltd||392.45||361.5||30.95
|Majestic Auto Ltd||116.55||99||17.55
The stocks of top ten listed players in Automobile sector have slided by -12.47% on an average between 4th November to 18th November 2016 with the political move to demonetize and clean India of Black money. Automobile sector players like Majestic Auto Ltd, Eicher Motors Ltd, Atul Auto Ltd, Mahindra & Mahindra Ltd, Maruti Suzuki India Ltd, Hero Motocorp Ltd have all responded negatively to the market.
Drop in share price can be noted prominently in three of the largest players Eicher Motors,Maruti Suzuki and Hero Motocorp whose investors suffered a major blow when share prices dropped by Rs.2186.95, Rs.754.45 and Rs.342.95 respectively.The share price dived to lowest for Eicher Motors at Rs.20284.35 from Rs.23951.95 within the two-week duration.
By Percentage change Lohia Machines Limited (LML Ltd) the U.P based scooter and motorcycle manufacturer has witnessed a dip of -27.97% within the past two weeks.
Incidentally, the change in stock price for TVS Motors and Tata Motors Ltd were comparatively less affected amidst automotive sector. Cushioning cautiously amongst the lowest dip of -7.7% has been Tata Motors Limited, despite the Cyrus Mistry vs. Tata group dishevels.
A visionary view is needed to sustain SMEs, Farmers, Foreign investments, Manufacturing and Capital intensive Businesses bringing the equilibrium back soon. While the general public is supportive of the demonetisation move, many industry experts regard this move to be detrimental to the growth of the country.
Meera Sanyal, former CEO and Chairman of the Royal Bank of Scotland in India, responded to the move through insights on Finance 101. She quoted “Business and Companies become bankrupt not due to lack of Assets but rather due to the loss of Liquidity. If 80% blood is drawn out a sick entity in a hope to revive, only 20% lifeforce would not be able to sustain for long causing irreversible damage, thus consequences need to be anticipated to hedge risks.”
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