InvestorQ : Why did the stock of Maruti Suzuki fall sharply on Friday despite the markets trading higher?
Ria Jain made post

Why did the stock of Maruti Suzuki fall sharply on Friday despite the markets trading higher?

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Dia Deshpande answered.
3 weeks ago
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Maruti Suzuki fell 4% after foreign brokerage firm CLSA held on to its sell rating on the stock. CLSA also cut its target price for Maruti from Rs.6,880 to Rs.6,550. The logic provided by CLSA was that Maruti was up against the dual headwinds of a weak demand cycle and rising commodity inflation. Which has been visible for the last few months. In addition, Maruti has also been losing market share to newer models in the compact SUV space.

CLSA also believes that to make the best of the recovery, Maruti may lay more emphasis in volumes than on margins which could hit the profitability of the stock. However, CLSA did hold the view that Maruti would continue to enjoy leadership in the passenger car segment in the foreseeable future. According to CLSA, Maruti’s market share in the passenger vehicle segment has fallen by 3% due to the new introductions.

While Maruti has been passing on cost increases for now, CLSA feels it will be tougher in the future as competition becomes more intense.

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