The Nifty Auto index fell for the fifth-straight session, and closed 1.5% lower on Monday. Over the last five trading sessions, the Nifty Auto index has fallen 4.2%.
According to analysts, the Nifty Auto index was unable to surpass its previous high resistance of 13,500 level, and has formed a triple top pattern, which is technically negative. They believe the index could underperform in the near term.
Bajaj Auto Ltd (down 5.43%) , Samvardhana Motherson International Ltd (down 4.55%), Eicher Motors Ltd and Tata Motors Ltd (down over 2%) were the major laggards on Monday weighing heavy on the index.
The positive contributors to the index were Tube Investments of India (up 3.6%), Bosch Ltd (up 0.85%), and Ashok Leyland Ltd (up 0.25%).
N.S.Ramaswamy, Head CRM & Commodities of Ventura Securities Ltd believes that the earnings for the auto companies has been drastically expected lower in quarter.
Thus, already at 18 PE (price-to-earnings) one year forward is higher (market needs a correction) and added to that the valuation is further increasing due to a poor denominator.
Further, besides the above factors, a rise in the dollar index with expected hawkish US Fed's to hike interest rates, foreign institutional investors short selling in equities, cautious move by our domestic institutional investors, MF AMC fund managers remain wait and watch.
"Retail players are majorly losing money in derivatives and that's a major contributor and thus they shy away from cash market as well. Global markets are also showing signs of fatigue, and high debt companies bottom-line will further get impacted due to higher interest outgo. Besides these, finally we have the continued geopolitical scenario tensions between US and Russia," added Ramaswamy.