After touching a high of nearly Rs.10,000 in the middle of last year, the Maruti stock has given up more than 40% from the peak levels. In terms of price point of entry, the stock surely offers lesser downside risk. You can also look at the June quarter results to fine tune your stand on the stock. For the June quarter, Maruti reported a 27% fall in net profits to Rs.1435 crore largely due to lower sales volumes as the auto industry suffers from a major demand compression across the board. Overall revenues, however, were up by 12% at Rs.19,720 crore. However, the profit was actually helped by a 3-fold increase in other income from Rs.271 crore to Rs.831 crore. The EBITDA fell by 39% on a YOY basis on higher operating cost pressures leading to a 450 bps margin compression to just about 10.4%.

In valuation terms, Maruti is now down to just about 23X historical earnings but the big worry remains the falling sales volumes and the sharp fall in margins. At 10.4% EBTDA margins, it will be bard to even sustain current valuations. The only way the stock can bounce back is some major announcements by the government to unlock auto demand in India. As of now that is not visible so it is best to stay away from buying for now.