Maruti’s sales numbers for the month of December confirm that the passenger car segment remains a growth area. This segment is an exception in the automobile segment, where commercial vehicle and two-wheeler volumes were disappointing in FY08.
After a year-on-year growth of 15.4 per cent in October 2007 and a whopping 26.6 per cent in November, the December sales growth of 9.7 per cent appears slightly tepid. But that’s because of Diwali purchases in November.
Even in terms of absolute numbers, the company had sold a record 65,216 vehicles in November, while December sales were lower at 62,515 units.
Domestic sales grew slower in December at 6.9 per cent, while the export growth was a robust 75 per cent. The growth in its key A2 segment, comprising Alto, Wagon-R and Swift, was low at 2.9 per cent.
The A3 segment grew by 54.7 per cent, thanks to higher SX4 sales. Maruti’s sales have been an impressive 18.5 per cent for the nine months ended December 2007, with domestic sales growth of 16.7 per cent.
The A3 segment grew at the rate of 61.4 per cent and A2 segment was up by 20.2 per cent in the same period. Exports have grown by over 50 per cent this year, though they account for just over 5 per cent of the total volumes.
The higher raw material costs had resulted in a dip in Maruti’s Q2 FY08 operating profit margin by a yearly 80 basis points and quarterly 150 basis points to 13.1 per cent. Going forward, the passenger car segment is going to be in the spotlight.
Steel prices are going up, and though car companies will raise prices this quarter, margins are going to be under pressure, as has been indicated by Maruti’s managing director. Also, Tata Motors’ small car will be unveiled next week.
The Maruti stock has been an outperformer within the sector. It grew 19.7 per cent in the first eight months of FY08 compared with 12.6 per cent in the passenger car industry. Maruti trades at about 13 times FY09 earnings, and should do well.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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