Can Maruti Suzuki shares finally cross the Rs 10,000 mark?

Story of headwind becoming tailwind

Here are some possible reasons why Maruti can outperform-

1. Headwind becoming Tailwind

Throughout 2021 & better part of 2022, Autos suffered from higher input costs, higher crude prices affecting demand & lack of chips leading to non-fulfillment of demand.

Well, all of them seem to be reversing now. Fed’s hawkish outcomes in the past few FOMC meetings have significantly impacted the prices of commodities and crude, along with putting pressure on the 'Equity asset class' while pushing the bond yield higher. This tailwind makes Autos attractive in the medium term.

2. India’s consumption story getting stronger!

Here are a few key data points- Strong job creation in the formal sector increase in GST collection numbers in previous months increasing credit card/UPI spendingBiggest of all, with credit growth at 16.2% y-o-y, it's quite amazing how quickly have things changed as throughout 2021 we had credit growth of around 6-7% despite having a low base of 2020. Such indicators clearly point towards the fact that coming October can be the best ever month for 4-wheeler sales.

3. Lack of alternatives

When you look at the alternatives for investment in 4-wheeler space amongst listed shares, names like Tata motors & M&M come up. Where Tata Motors has a higher probability to underperform the markets due to global exposure (with China facing regular lockdowns, Europe's energy issues & especially the U.K. where the new government's tax cuts are pushing the country's fiscal stability & currency at greater risk)

On the other hand, Mahindra & Mahindra seems to have already priced in all good news on EVs (including the likes of new EV launch announcements, and fresh investments in their EV portfolio companies) which is reflected by the fact that it gave a return of over 50%+ 2022 itself when the Nifty is flat year to date.

Many other positive reasons include a huge order backlog, new launches (New Brezza & Vitara) performing well, & others. 

There are a few risks involved here that we like to mention which include- 

1. Global equity sell-off

2. Chip shortages emerging again

3. Brent Crude back above $95-100 per barrel 

4. Any company-specific news/happening that the market isn’t aware of yet

On the charts as well, the stock looks well placed for a breakout!

It's possible that the share reaches the target price within the next 12-14 weeks. Let's see how it pans out!

Disclaimers- 

Personal & client investment/interest in the shares exist; this isn’t investment advice; DYOR (do your own research) is recommended; Investing & trading are subject to market risk; the Decision maker is responsible for any outcome