INDIAN AUTOMOBILE INDUSTRY

PROJECT REPORT
ON
ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY

Group members-
Anil Kumar 10em01

Chandan Singh 10em04

Gulshan Kumar 10em07

Harsh Gupta10em08

Sambit Gantayat 10em15

 INDIAN AUTOMOBILE INDUSTRY

PREFACE

Indian automobile industry has grown leaps and bounds since 1898, a time when a car had touched
the Indian streets for the first time. At present it holds a promising tenth position in the entire world with
being # 1 in Two Wheelers and # 4 in commercial vehicles. Withstanding a growth rate of 18% per
annum and an annual production of more than 2 million units, it may not be an exaggeration to say that
this industry in the coming years will soon touch a figure of 10 million units per year.

The automobile industry in India — the ninth largest in the world with an annual production of
over 2.3 million units in 2008 — is expected to become one of the major global automotive
industries in the coming years.

In this project we have undergone a detailed analysis of India automobile industry by using Fundamental

and Technical tools. In order to better understand the performance of the industry we have made

comparative analysis of Two players Tata motors as (leading player) and Maruti Suzuki.

The project report is divided into 5 chapters. The first two chapters include Executive Summery &
objective of the research. The third chapter deals with analysis of automobile Industry which entails
fundamental and technical analysis of Indian Automobile Industry. The fourth chapter deals with
Conclusion & Recommendations and the last chapter includes Bibliography.
TABLE OF CONTENT
S.NO. PARTICULARS PAGE NO.
Chapter 1. Executive Summary of the Project
Chapter 2. Objective of the Project
Chapter 3. Analysis of Indian Automobile
Industry

• Fundamental Analysis
a. Economy
b. Industry
c. Company
- Financial & Non-Financial
• Technical Analysis
a. Share Price Analysis
b. Moving Average
c. Moving Average Crossover
d. Bollinger Band
e. M.A.C.D
Chapter 4 Conclusion & Recommendations
Chapter 5 Bibliography
Annexure
EXECUTIVE SUMMARY

The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of
new business and manufacturing practices in the light of liberalization and globalization. The sector
seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable
surge in demand. The Indian automobile market is gearing towards international standards to meet
the needs of the global automobile giants and become a global hub.

A detailed analysis of Automobile industry has been covered in respect of past growth and performance.
Under this project to better understand the Industry we have used Fundamental and Technical tools to
make it more authentic n meaningful. An E.I.C approach has been followed under Fundamental Analysis
which covered effect of Recession, the impact of inflation, FDI’s, Export, GDP etc. on Automobile
Industry. The Industry Analysis has been done with the help of five forces model, BCG Matrix, SWOT
analysis, industry life cycle and the industry specific index. For Company Analysis as a part of
Fundamental tool we have undergone with the comparative analysis of TATA Motors as our leading
company with Maruti Suzuki India’s largest Car manufacturer. The fundamental aspect consists financial
and Non-Financial analysis of both the company. In the Technical aspect we have considered Share
price analysis, moving average, moving average crossover, Bollinger bands and M.A.C.D. of both the
company by keeping TATA Motors as our leading company.

At the end conclusion and recommendations have been specified so as to make the research
work more meaningful and purposeful.
OBJECTIVE OF THE PROJECT

The objective of this project is deeply analyze our Indian Automobile Industry for investment

purpose by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

· Detailed analysis of Automobile industry which is gearing towards

international standards

· Analyze the impact of qualitative factors on industry’s and company’s prospects

• Comparative analysis of two tough competitors TATA Motors and Maruti Suzuki

· Application of various Technical Tools and Fundamental tools (like Financial

and Non-financial statements).

ANALYSIS OF AUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile industry has been driving its own growth
through phases. With comparatively higher rate of economic growth rate index against that of great global
powers, India has become a hub of domestic and exports business. The automobile sector has been
contributing its share to the shining economic performance of India in the recent years.

To understand this industry for the purpose of investment we need to analyze it by

following two approaches:
1). Fundamental Analysis (E.I.C Approach)
a.Economy
b. Industry
c. Company
2).Technical Analysis
 1) FUNDAMENTAL ANALYSIS

a). ECONOMY
Economic analysis is the analysis of forces operating the overall economy a country. Economic
analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic
analysis is important in order to understand exact condition of an economy.

GDP and Automobile Industry

In absolute terms, India is 16th in the world in terms of

nominal factory output. The service sector is
growing rapidly in the past few years. This is the pie- chart
showing contributions of different sectors in Indian economy.
The per capita Income is near about Rs38,000 reflecting
improvement in the living standards of an average Indian.

Today, automobile sector in India is one of the key sectors of the economy in terms of the employment.
Directly and indirectly it employs more than 10 million people and if we add the number of people
employed in the auto-component and auto ancillary industry then the number goes even higher.

As the world economy slips into recession hitting the demand hard and the banking sector takes conservative
approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 per

INDIAN AUTOMOBILE INDUSTRY

cent for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr. Montek Singh (Planning
Commission of India). Following is the graph showing a trend of Indian GDP trend in past 3 years.

Source:India Central Statistical Organization

The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is near about
5% and will be double by 2016. The automotive industry in India grew at a computed annual growth rate
(CAGR) of 11.5 percent over the past five years, but growth rate in last FY2008-09 was only 0.7% with
passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21.7%.

Recession
All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of the
year, industry had to face the hard truth and witnessed the fall in sales compared to last year. In
December 2008, overall production fell by 22 % over the same month last year. Global
recession has hit the Indian auto industry, India is strong and growing industry but the impact of
recession is evident now on industry as sales & growth of automobile companies have declined.
Passenger Vehicles segment registered negative growth.

One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13.86%
over December 2007 Two Wheelers registered minor growth of 1.85 % during April – December
2008. However, Two Wheelers sales recorded 15.43 percent fall in December 2008 over the same
month last year. Although the sector was hit by economic slowdown, overall production (passenger
vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million
vehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased marginally
from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to 8.41 million. Total
number of vehicles sold including passenger vehicles, commercial vehicles, two-wheelers and three-
wheelers in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.

Inflation
Despite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of sales in auto
sector. A moderate amount of inflation is important for the proper growth of an economy like India
because it attracts more private investment. The fall in wholesale prices from a year earlier is mainly due
to a statistical base effect and doesn’t suggest contraction in demand, the Reserve Bank of India said few
week back, while revising its inflation forecast for the FY through March to around 5% from 4%.

In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20
per barrel five years back), Indian automobile Industry was not as much affected and experts think
that Indian automobile industry will continue to grow this year despite all obstacles- oil price hike,
higher interest rates. However, the effect of inflation has affected every sector which is related to
car manufacturing and production. The increase in the price of fuel and the steel due to inflation has
led to a slower growth rate of the car industry in India. The effect of inflation has taken the rise in
the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw
materials to build a car. The car market and the car industry witnessed a fall of 8-9%.

FDI’s
In India FDI up to 100 percent, has been permitted under automatic route to this sector, which has
led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts
industry. India enjoys a cost advantage with respect to casting and forging as manufacturing costs
in India are 25 to 30 per cent lower than their western counterparts the Investment Commission has
set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase
India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent by
2015. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25% compare
to 2007-08, while in April-May 2009 it was around Rs.497 Cr.
Source- FDI Statistics Govt. of
India

Foreign Exchange
India holds the third largest stock
of reserves among the emerging
market economies after China and
Russia. The overall approach to
the management of India's
foreign exchange reserves in
recent years reflects the changing
composition of the balance of
payments and the 'liquidity risks'
associated with different types of
flows and other requirements. Source: rbi.org.in

Taking these factors into account, India's foreign exchange reserves continued to be at a
comfortable level and consistent with the rate of growth, the share of external sector in the
economy and the size of risk-adjusted capital flows. Following is the table shows the trend of
foreign reserves held by central bank in last FY. Reserves came down cause of recession all
over the world however India still able to maintain its reserves hence a minor fall was seen
compare to all other country which shows great strength in long-term for Indian Economy.
Increase in Exports specially from auto industry shows an expectations of huge income from
western countries and new $200 bl. target for exports by 2011 helps in increasing.

INDIAN AUTOMOBILE INDUSTRY

1.FCA (Foreign Currency Assets): FCAs are maintained as a multicurrency portfolio comprising ajor currencies, such as,
US dollar, Euro, Pound sterling, Japanese yen, etc. and is valued in terms of US dollars.
2. SDR (Special Drawing Rights): Values in SDR have been indicated in parentheses.
3. Gold: Physical stock has remained unchanged at approximately 357 tonnes.
4. RTP refers to the Reserve Tranche Position in the IMF.

Export

Society of Indian Automobile Manufacturers (SIAM), automobile sales (including passenger

vehicles, commercial vehicles, two-wheelers and three-wheelers) in the overseas markets
increased to 1.53 million units in 2008-09 from 1.23 million units in 2007-08. Export of
passenger vehicles increased from 218,401 in 2007-08 to 335,739 units in 2008-09.

There is a continuous increase in the export of automobiles since the financial year 2002-03,
except for the decline in the export of commercial vehichles in the financial year 2008-09, which
may be attributed to the global economic recession.
 Despite recession, the Indian automobile market continues to perform better than most of the
other industries in the economy in coming future, more and more MNC’s coming in India to
setup their ventures which clearly shows the scope of expansion.
Current Scenario of Automobile Industry in Economy
With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in near
future, Two wheeler segment sales grew up by 12.8% with the modest 2.6% growth rate, under this
segment the market leader Hero Honda registered growth of 12% in its domestic sales where as
Bajaj Auto disappointed as sales plunging by 23%, on the other hand car sales has been grew up by
a healthy 22.7% in last February and Commercial Vehicles reported slower sales. It is assumed that
in coming festive season to meet demand, carmakers going to produce 70000units/month more over
the average 1.3lac/month with help of 5000 new hands. Source: Economic

INDIAN AUTOMOBILE INDUSTRY

Indian Automobile Industry at Global level:

· India ranks 1st in the global two-wheeler market

· India is the 4th biggest commercial vehicle market in the world
· India ranks 11th in the international passenger car market
· India ranks 5th pertaining to the number of bus and truck sold in the world
· India is the second largest tractor manufacturer in the world.

Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact car
section of car market in India. Source: Economic Times
Sales of different Auto Companies speed up even before festive season Maruti by 29%, TATA
by 11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc.
Source: Economic Times (3/09/09)

It is expected that the Automobile Industry in India would be the 7th largest automobile
market within the year 2016.

Projected Growth rate in Automobile Industry

· Passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.75
million units by 2014.
· The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million units.
· To emerge as the destination of choice in the world for design and manufacture of automobiles
and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of
the GDP and providing additional employment to 25 million people by 2016.

b.) INDUSTRY ANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the developed countries the
automobile industries are stagnating as a result of drooping markets, whereas the automobile
industry in the developing nations, have been consistently registering higher growth rates every
passing year for their domestic flourishing domestic automobile markets.
 Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the
nature of competition, Product Life Cycle and consumer demand. The industry is at the crossroads with
global mergers and relocation of production centers to emerging developing countries.
In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian
automobile sector is far from being saturated, leaving ample opportunity for volume growth.

Segmentation of Automobile Industry

The automobile industry comprises of Heavy

vehicles (trucks, buses, tempos, tractors);

passenger cars; Two-wheelers; Commercial
Vehicles; and Three-wheelers. Following is
the segmentation that how much
each sector comprises of whole
Indian Automobile Industry.

Industrial Analysis of any industry can be done based on the following headings:

1. Five Forces Model

2. BCG Matrix
3. Industrial Life Cycle
4. SWOT Analysis
5. Industry Specific Index

1.) Five Forces Model

Michael Porter identifies five forces that influence an industry. These forces are

• Degree of Rivalry
Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto
sector is intense due to the entry of foreign companies in the market. The industry rivalry is
extremely high with any being product being matched in a few months by the competitors.
This instinct of the industry is primarily driven by technical capabilities acquired over years of
gestation under the technical collaboration with international players.

• Threat of Substitutes
The threat of substitutes to the automotive industry is fairly mild. Numerous other forms
of transportation are available, but none offer the utility, convenience, independence
and value offered by automobiles. The switching cost associated with using a different
mode of transportation, may be high in terms of personal time, convenience and utility.
• Barriers to entry
The barriers to enter automotive industry are substantial. For a new company, the startup capital
required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive.
Although the barriers to new companies are substantial, establishing companies are entering the
new markets through strategic partnerships or through buying out or merging with other companies.
However, a domestic company, with local knowledge and expertise, has the potential to compete its
home market against the global firms who are not well established there.

• Supplier’s power
In the relationship between the industry and its suppliers, the power axis is
tipped in industry’s favor. The industry is comprised of powerful buyers who
are generally able to dictate their terms to the suppliers.

• Buyers’ Power
In the relationship between the automotive industry and its ultimate consumers,
the power axis is tipped in the consumers’ favor. This is due to the fairly
standardized nature and the low switching costs associated with selecting from
among competing brands.

2.) BCG Matrix

In an economy, different industries are present and different industries have different
growth rate as compared to the growth of the economy. In an economy, there are a
number of major industries and they all occupy different positions in the BCG matrix
according to their growth and contribution towards the economy. In the Indian
economy, some of the major sectors are FMCG, automobiles, banking and insurance,
steel, telecom, software, pharmacology and retail sectors and these can be placed in
the different positions in the matrix as shown below:
 INDUSTRY BCG MATRIX

H S QUESTION
Banking
&
M Telecom
a
AUTOMOBIL Retai
r
k
e Softwa
t

G CASH D
r
o F
w
t
h

Low

H Relative market Low

share
 3.) Industrial Life Cycle
The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle
classification generally groups industries into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or adopted. Business strategies
are developing, and there is high risk of failure. However, successful companies can grow at
extraordinary rates. The Indian automobile sector has passed this stage quite successfully.

In the growth phase, the product market has been established and there is at least some historical
guide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate of
sales and earnings growth . Indian Automotive Industry is booming with a growth rate of around 15
% annually. The cumulative growth of the Passenger Vehicles segment during April 2007 – March
2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent
and Multi Purpose Vehicles by 21.39 percent in this period. The Commercial Vehicles segment
grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66
percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell
by 9.71 percent with sales of Goods Carriers declining drastically by 20.49 percent and Passenger

Carriers declined by 2.13 percent during April- March 2008 compared to the last year. Two
Wheelers registered a negative growth rate of 7.92 % during this period, with motorcycles and
electric two wheelers segments declining by 11.90
percent and 44.93% respect. However, Scooters
and Mopeds segment grew by 11.64% and 16.63%
respect. The growth rate of the automobile industry
in India is greater than the GDP growth rate of the
economy, so the automobile sector can be very well
be said to be in the growth phase.

As the product matures, growth slows as penetration reaches practical limits. Companies began
to focus on market share rather than growth. Industry demand tends to follow the overall economy,
but the scope of growth of the automobile sector is very much possible in India due to the
increasing income of the middle class and their income as well as standard of living.
 4.) SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning
process. Environmental factors internal to the firm usually can be classified as strengths (S) or
weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats
(T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT
analysis of the Indian automobile sector gives the following points:

INDIAN AUTOMOBILE INDUSTRY

Strengths
· Large domestic market
· Sustainable labor cost advantage
· Competitive auto component vendor base
· Government incentives for manufacturing plants
· Strong engineering skills in design etc
Weaknesses
· Low labor productivity
· High interest costs and high overheads make the production uncompetitive
· Various forms of taxes push up the cost of production
· Low investment in Research and Development
· Infrastructure bottleneck

Opportunities
· Commercial vehicles: SC ban on overloading
· Heavy thrust on mining and construction activity
· Increase in the income level
· Cut in excise duties
· Rising rural demand

Threats
· Rising input costs
· Rising interest rates
· Cut throat competition

5.) Industry Specific Index

Industry specific index also called as sectoral index are those indices, which represent a
specific industry sector. All stocks in a sectoral index belong to that sector only. Hence an index
like the BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking the
movement and performance of particular sector.

BSE Auto Index comprises all the major auto stocks in the BSE 500 Index.
· BSE AUTO Index 5 Year Chart

· Automobile Industry Index at BSE for 5 Year

COMPANY
Source:Googlefinance.com

Above is the Indian Auto Industry Index(BSE) shows the up’s and down’s over the period of 5 years.
Intially in 2003 when major giants got listed on stock exchange TATA Motors, Maruti Suzuki, etc. indian
auto industry start picking up growth slowly in the first end of 1st quarter index reaches to its highest in
his history. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point it
again start booming and than year on year we saw a up and down movement in the index as lots of new
players came in Indian market with foreign colaboration but when 2008 came with global slowdown it
brings the demand of automobile so low that index reaches to its lowest in past 5year . Most of the
company even shut down their manufacturing units for more than a week, production came down
because of less demand in the economy. Also no further launches were made in mid or late 2008 and
postponed to next year. We have also saw a fall in FDI’s in automobile Industry. But in the beginning of
2009 right from 1st quarter auto industry again start regaining and we saw a tremondous growth in auto
industry which never seen before not in india but all over the world. The demand of 2 and 4 Wheelers
start increasing rapidly which also force auto industry to employ more workers to meet demand and with

in the 2nd quarter of FY2009-10 Auto index reaches to its highest ever crossed mark of 6000. And this
growth of industry will be carry further as festive season still to come, so there is a lot of scope
to growth in this industry.

c.) COMPANY ANALYSIS (Maruti Suzuki & TATA Motors)

The company analysis shows the longterm strenght of the company that what is the financial Position of
the company in the market where it stand among its competitors and who are the key drivers of the
company, what is the future plans of the company, what are the policies of government towards the
company and how the stake of the company divested among different groups of people.

Profile of Maruti Suzuki

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the
car segment, both in terms of volume of vehicles sold and revenue earned. Until recently,
18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of
Japan. As of May 10, 2007, Govt. of India sold its complete share to Indian financial
institutions. With this, Govt. of India no longer has stake in Maruti Udyog.
The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit After Tax at Rs. 12,187ml.Maruti
Suzuki India Ltd. has sold a total of 84,808 vehicles in August 2009, an increase of 41.6%, compared to
59,908 vehicles in the same period of 2008. The company's domestic sales in August 2009 increased 29.3%
to 69,961 vehicles, compared to 54,113 vehicles in August 2008. Total passenger car sales in August 2009
increased 30.5% to 69,629 units, compared to 53,351 units in August 2008 The company's exports
increased 156.2% to 14,847 units, compared to 5,795 units in August 2008.

Profile of Maruti Suzuki

Tata Motors Limited is India’s largest automobile company, reported gross revenue (stand-alone) of
Rs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year marked by severe demand
contraction in the automobile industry. Revenues (net of excise) for the year were Rs. 25660.79
crores compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The Profit before Tax was
Rs.1013.76 crores compared to Rs.2576.47 crores in 2007-08, a decline of 60.7%. The Profit after
Tax for the year was Rs.1001.26 crores compared to Rs.2028.92 crores, a decline of 50.7%.

It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles
with winning products in the compact, midsize car and utility vehicle segments. The company is the
world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer.

Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.

• Financial Analysis

1. Financial Statements

RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI

INDIAN AUTOMOBILE INDUSTRY
 Above is the updated share holding pattern of
TATA motors which shows that Indian promoter
share in the company is 41% that means if they
are not in the position to raise further money from
general public, Company already raised huge
money by selling their large stake to institutional
investors about 27%. General Public also have
quite large stake in the company
Being a venture of Japanese company Suzuki big
stake of the company is held by foreign promoters
2. Board of Director which shows that they can divest their part(small
TATA Motors part) to raise money in future. However
institutional investors also held 39% major stake
Mr. Ratan Tata Chairman
in the company but general public have very small
Mr. N.A. Soonawala Director
part which shows that less presence of share in
Mr. R. Gopalakrishnan Director
the secondary market hence low volume trading
Mr. S.M. Palia Director
Mr. S. Bhargava Director in stock market.
Mr. V. K. Jairath Director
Mr. Ravi Kant Vice Chairman
Mr. J. J. Irani Director Maruti Suzuki
Mr. N. N. Wadia Director Mr. R. C. Bhargava Chairman
Mr. R.A. Mashelkar Director Mr. Shinzo Hakanishi MD and CEO
Mr. n Munjee Director Mr. Manvinder Singh Banga Director
Mr. Prakash M Telang Director Mr. Amal Ganguli Director
Mr. D. S. Brar Director
3. Upcoming Ventures & Products
Mr. Keiichi Asai Director
Mr. Osamu Suzuki Director
TATA Motors
Mr. Shuji Oishi Director
Ms. Pallavi Shroff Director
Mr. Kenichi Ayukawa Director
Mr. Tsuneo Shashi Director &
Managing
Executive
Office (Production)

Tata Motors is try to be in a position to dominate the Indian Auto industry, at least in four-
wheeler segment. Tata Motors have announced that they are interested in the idea of
designing electric cars. To take it a step further Tata has also initialized plans for the
manufacture of a hybrid car which it will market with Chryster in the U.S.
After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The company
hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012. Tata Mo
is now aiming to launch its cars in Indonesia and is also planning
to sell Nano in South America with the help of Fiat. After
launching the world’s cheapest car, Nano, Tata Motors is looking
east, towards neighboring Myanmar to boost its sales by setting
up a truck manufacturing plant. As part of its expansion plans in
Southeast Asia, Tata Motors had inked a joint venture with
Thailand’s Thonburi Auto Assembly’s to manufacture up to
35,000 one tone pickup trucks a year over the next 3-5 years.
Tata Motors, is searching options to pump approximately Rs.
8,000 cr. During the next 3-4 years on capital expenditure and
product development.

Maruti Suzuki
Maruti Suzuki has expanded the capacity at its Manesar plant
to 1.7 lakhs unit per annum from January 2009. By the year
2010, Suzuki Motors plan to increase their dealership in India.
This is a step to increase their sales to one million units as
well as for a better position in the Indian auto market. The
expansion is estimated to cost $ 3.5 billion, out of which a
quarter will be assigned for amplifying leadership network to
1000 in number.
As Maruti Suzuki eyes one million sales by 2010, they have firmed
up a massive expansion plan of its service network and plans to
expand it to 1700 towns and cities from the current of about 1200.
The company plans to increase the number of service stations and
workshops to over 3800 from about 2800 currently. They have
also been coming with specific sales promotion programmes
targeted at interior regions, among them is the “Mera Sapna Meri
Maruti: New Panchayati Scheme”. The Haryana government has
allotted 700 acres of land to Maruti Suzuki for hi – tech Research
& Development complex at Rohtak. The upcoming facility, will see
an investment in the range of Rs. 1,000 cr. to 1,500 cr. And will
introduce world class R&D facilities into India. While the
development of the allotted land and construction of the test tracks
will be completed in the first phase by 2012, the overall R&D
facilities will be progressively completed by 2015.

In a move ahead, Maruti Suzuki India limited launched

the Estilo with all new overall looks and advanced
technological features.

The upcoming cars in near future by both companies are:

 TATA Motors

Maruti Suzuki

Products (CAR)

Expected
Launch
Maruti Grand
Vitara Diesel
December- 2009
Maruti 02

December 2009
Maruti SX4 Diesel

December 2009
Maruti Cervo

December 2009
Maruti Kizashi

December 2009
Maruti xl7

March 2010

Maruti APV
Maruti Jimny

4.Government Policies Towards Indian

Automobile Industry

Automobile industry in India also received an unintended

boost from stringent government auto emission regulations
over the past few years. This ensured that vehicles produced
in India conformed to the standards of the developed world.

Though it has an advantage in India, thanks to low costs

and government policies it soon faces stiff competition
from it multinational competitors all eyeing for a share in
the ever growing Indian auto sector. The policies adopted
by Government will increase competition in domestic
market, motivate many foreign commercial vehicle
manufactures to set up shops in India, whom will make
India as a production hub and export to nearest market.

· Bring in a minimum foreign equity of US $ 50

Million if a joint venture involved majority foreign equity
ownership
· Automatic approval for foreign equity investment upto
100% of manufacture of automobiles and component is
permitted
· FIIs including overseas corporate bodies (OCBs) and
NRIs are permitted to invest up to 49 per cent of the paid-up
equity capital of the investee company, subject to approval of
the board of directors and of the members by way of a special
resolution. .
· Investments in making auto parts by a foreign vehicle maker
will also be considered a part of the minimum foreign investment
made by it in an auto-making subsidiary in India. The move is aimed
at helping India emerge as a hub for

INDIAN AUTOMOBILE INDUSTRY

Upstrea

Primary

Deviati
Reaction
The third tenet of Dow Theory is that the market counts all news, meaning that once news is
released it is quickly reflected in the price of an asset.
In the case of Tata motors, as the market started recovering after December’2008, the share prices started
increasing but they again saw a decline, which may be attributed to the news of breach of JLR contract
with Ford Motors which may cause Rs.3bl panelty. The sales of Tata motors decreased by 4% in June
end’ 2009 which can be one more reason for the decline in stock prices of Tata motors.

The above graph also illustrates the sixth tenet, which says that trends exist until definitive signals
prove that they have ended. The market may show moves which are against the primary trend but
this do not mean that the trend is over and the market will normally resume its prior trend.
In the case of Tata motors, when the prices were decreasing during recession, the stock price even
increased once, but the market then again followed its prior trend of declining prices.

SENSEX AND TATA MOTORS

Tenet four of Dow Theory is that the averages must confirm each other, that means that the
performance of related industries should move in one direction for the health of a particular
industry. When the performances diverge, it is warning that change is in the air. However, we
can see that the movement of stock prices of Tata motors and SENSEX are more or less in
the same direction. One thing which very clear is TATA motors react very badly whenever
there is a negative sentiments comes in market results SENSEX comes down, and TATA
motors also comes down. Different sets of colored line in above chart prove this fact.
Tenet five is that Trends are confirmed by volume. In case of Tata motors, when the people
stopped investing during recession, prices went down and after recession, when people came
back to the market, prices also increased.

1. Resistance & Support Level

This Technical tool helps in telling that what would be the price band of share price in which it
move in near future on the basis of past high and low levels made by a particular scrip.
Resistance Level shows the price above which share price will not move in normal case on
the other hand Support level shows the minimum share price which can be touched by share
or crossing of this share will not be there in normal market condition Following is the
Resistance & Support level of Maruti Suzuki & TATA Motors for the period of 2 months:

Resistance
Level
Rs.1425

Support level
RS.1275 approx.

(1-Jul-09 to 7-Sept-
Resistance
Level
Rs.490 approx.
Support Level
Rs.430 approx.
As it is seen in the past 4 months
 TATA share price moved up and it
keeps making on new level so perfect
resistance level for this share is not
easy to predict as performance of this
share is very good compare to all
scrips of this
segment.
The above band of resistance and support level shows that the price of shares will move in
between this range only until unless any wrong reaction came out in economy or when any
correction takes place the prices will move in between this band only.

2. Simple Moving Average (50 periods)-Medium Term

Moving Average is an indicator that shows the average value of a security's price over a period of time. The
method of interpreting a moving average is to compare the relationship between a moving average of the
security's price with the security's price itself. In above figure we have compare the share price of Tata
Motor and Maruti with moving average of 50 period of Tata Motors, Maruti respectively.
A buy signal is generated when the security's price rises above its moving average and a sell signal is
generated when the security's price falls below its moving average. It is designed to keep you in line
with the security's price trend by buying shortly after the security's price bottoms and selling shortly after
it tops. Yellow area in the graph indicates buy signal and Green area indicates sell signal. In the near
future both the companies show buy signal as their security prices rises above its moving average. It
shows that both companies are performing better, so industry as whole is also performing outstanding.
So keeping a hold position for the companies would be profitable in future.
 3. Long Term Simple Moving Average (200 periods)

In the above chart Moving Average is an indicator that shows the average value of a security's
price over a period of time. We have compare the share price of Tata Motor and Maruti with
moving average of 200 period of Tata Motors, Maruti respectively by taking share prices of 5
year to take out the Moving average for 200 periods. This Tool of 200 Periods tells us about
the position of share to buy or sell for a long period say for 9-12 months.

A buy signal is generated when the security's price rises above its moving average and a sell signal is
generated when the security's price falls below its moving average. Yellow area in the graph indicates
Buy signal and Green area indicates Sell signal. In the near future both the companies show Buy signal
as their security prices rises above its moving average. This shows that an investor can kept a
hold position or can buy for longer period of time but as we can see in case of Maruti the
moving average line is also rising which shows that Buy n hold position for very long period
could be unprofitable a minor correction in the share price can bring down the share price line
and then moving average line will easily cross the share price line.
 4. TATA MOTORS MACD

Sell

Overboug
Overso Buy

Above graph shows the MACD of TATA motors for the period of 6 months. The MACD is the difference
between a 26-day and 12-day exponential moving average. A 9-day exponential moving average(EMA),
called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. here are
three popular ways to use the MACD: crossovers, overbought/oversold, and divergences.

Crossovers: Yellow area shows that there was situation when sell position occurred in the end of month
June till mid of July as MACD curve below EMA or Signal line shows a sell situation otherwise we saw a
buy position of TATA Motors most of the time Light Green area shows that investor want to buy and wan to
be in hold position. The trend of buying is seems to be over here or in coming few days and a selling or
booking of profit could be seen hence MACD line could fall below EMA in coming time.
6.) BOLLINGER BAND
Bollinger bands are used to measure a market’s volatility. Basically, this little tool tells us
whether the market is quiet or whether the market is LOUD! When the market is quiet, the
bands contract; and when the market is LOUD, the bands expand.

TATA Motors

On the graph it can be seen the overall trend of the market and quick reference for supply and demand as
well as support and resistance areas by using a 20 days moving average and 2 standard deviation in
calculating the Bollinger Bands. As we can see in the graph is that the at most of the time the graph lies
between the middle band and the upper band which shows an increasing price trend in the market and it’s
called Riding the Band. When the stock is outside the upper end of the Bollinger band it is considered as

‘OVERBOUGHT’, which means that stock has gone up too fast and when a stock is outside the
lower band it is ‘OVERSOLD’. An oversold stock has gone down too fast. During the months of
April, May, mid July and mid august the stock of TATA motors crossed the upper band which
means that during these periods the prices rose very fast, while in mid of July the stock went below
the lower band, i.e. The prices fell too fast and are susceptible to bargain hunting. The overbought
and oversold stocks are apt to reverse course. It’s also seen that the volatility increased to new
highs after July because the bands started to widen. It’s better to buy stocks when it touches the
lower band, but in regards all other technical factors should be considered while buying.
Initially the bands show slight slope and lie approximately parallel to each other, this means
that the price of the stock is oscillating up and down between the bands through a channel. The
stock also shows overbought many times during the six months but it did not show any
oversold trend, therefore it becomes an important factor in determining the price trend as it tells
that the prices have not fallen very fast in these six months. During the june month the bands
contracted very much which shows low volatility, but then onwards the bands started to widen
which creates high volatility and looking at the future scenario it may be analysed that the stock
will see a fall as at the end of august the band was overbought, because when price is trading
near the upper or lower Bollinger band line, there is a possibility of trend reversal.
The buy and sell signals are not given when prices reach the upper or lower bands. Such levels merely
indicate that prices are high or low on a relative basis. A security can become overbought or oversold
for an extended period of time. Knowing whether or not prices are high or low on a relative basis can
enhance the interpretation of other indicators, and it can assist with timing issues in trading.

CONCLUSION

Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for
FY2009-10 compare to last year growth rate which was just 0.7% and the above facts and
figures in our study also support this truth.

Indian Automobile has a lot of scope for both two wheelers and four wheelers due to
development in infrastructure of the country and especially the rural sector in which demand of
two wheeler has increased even in recession. According to Indian Statistical Organization the
per capita income (Rs.38000) is increasing and national income at the rate of 14.4% which
shows potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fast
that by 2016 Indian Industry will be world 7 largest manufacturer in all sections.
The Indian auto market is still untapped the majority of the people in country don’t own a four
wheeler and all the major auto companies are trying to increase their sales by several moves.
Like TATA has launch NANO the people’s car and now TATA motors is also planning to come
out with an electric car as well as hybrid car, moreover in two wheeler segment many
companies like Mahindra and Mahindra grow even more than expectations.

From the Technical Analysis of both companies we come to know that the share price of Maruti
will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range of
Rs. 430 to Rs. 490 if certain correction made in the market.
We have also come to know that share price movement of TATA Motors is just according to the movement of
SENSEX, whenever there is a negative sentiment in the market regarding TATA Motors there is a steep fall
in the stock price of TATA Motors but we have seen quick recovery in its share prices to regain its primary
trend E.g as we seen in last 3-4 months TATA recovers approx.90% after downfall.

By analyzing the current trend of Indian Economy and Automobile Industry we can say that
being a developing economy there is lot of scope for growth and this industry still have to cross
many levels so there is huge opportunities to invest in and this is proving as more and more
foreign Companies setting up there ventures in India.

Recommendations
By analyzing the industry on various parameters with the help of implementing Fundamental and
Technical tools we came to know that this industry has a lot of potential to grow in future. So
recommending to invest in Automobile Industry have no doubt is going to be a good and smart
option because this industry is booming like never before not only in India but all around the world.
The returns which came out of this industry were very impressive recently, as if we take an example
of TATA motors it gives approx 90% return in a period of just 3 months while Maruti Suzuki shows
always a buy and hold position because there is possibility of growth in future, same situation is in
two wheeler segment with market leader Hero-Honda a debt free company also have bright future
ahead. The numbers which came out in the end of financial year 2009 prove that even in the period
of recession the overall sales went up is sufficient to support to this fact. Through Technical
analysis of TATA Motors and Maruti it can be recommended that for now Maruti share price shows
that it’s a time to hold the position or buy more shares as there is scope in further rise in share
prices until and unless any negative reaction or sentiments comes in the Economy.

Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there
is a chance of getting correction, as it already went on high side in a very short period of time
so holding the shares for long time could be a wrong step, so at this point of time those who
invested earlier can book their profit or new investors can buy now and sell with in short period
of time by earning profit in short period of time.

BIBLIOGRAPHY
www.bseindia.com
www.googlefinance.com
www.yahoofinance.com
www.google.co.in
www.moneycontrol.com
www.worldfact.com
www.rbi.org.in
FDI statistic government of India
India Central Statistical Organization
Economic Times