As a matter of fact, the 312 point rise in the Sensex has managed to change the short-term picture and the perception of the market. This rise has strengthened the technical position of the market and at the current level all pointers seem to indicate just one direction -- upwards. While the market was buoyed by the rise in stocks like Bajaj Auto, ITC and Hindustan Lever, for investors the good thing about the jump in values is thereare still a considerable number of stocks where a rally is yet to take place. And the investors have enough time to take a short-term entry into the market. In other words, market sentiment has taken a turn for the better, and last week's down-in-the dumps atmosphere has definitely lifted. This would mean that the unidirectional selling seen earlier will not persist, which has been brought out forcibly by the fact that despite short-selling being allowed, the market chose to move up. Although short-sellers will certainly return, they will do so only after some time.

Two-wheeler stocks

The shares of two-wheeler companies were in great demand last week. It all started with reports that Bajaj Auto has shown a 12 per cent jump sales in two and three wheeler to 3,44,699 units during the first quarter of 1998-99. This was clearly against the market expectations and the stock reacted positively, pushing the price up by 12 per cent within a short period of three trading sessions.

In the past two years,Bajaj Auto's market share in the scooter segment has been affected badly. LML has gained at Bajaj's expense. In the motorcycle segment, Hero Honda as well as TVS Suzuki have further strengthen their positions.

Thus reports that Bajaj Auto has achieved a 12 per cent jump in the first quarter is certainly heart-warming for the shareholders. This means that the company has shown an impressive jump during the month of June. During the first two months of 1998-99, Bajaj's scooter and motorcycle sales recorded a growth of 9 per cent and 19.6 per cent respectively. This was against the industry performance of 14 per cent for scooters and 18.3 per cent for motorcycles during the first two months of fiscal 1998-99.

Since the actual break-up for the first quarter figures are yet to be known, this report clearly suggest that demand has been showing a recovery. And that is good for Bajaj Auto as well as the industry. In fact, investment buying on other counters such as LML, Hero Honda and TVS Suzuki further confirmsthis theory. While LML was up by 7 per cent within three trading sessions, TVS Suzuki and Hero Honda recorded a jump of 8.31 per cent and 8.5 per cent respectively.

More good news for the two-wheeler segment will be a good monsoon. Although the CMIE has predicted a shortfall in the rains, and has posted lower consumption expenditure as a consequence of low growth in agriculture, recent rains may give the lie to that theory. Till date, the rainfall has been encouraging and if it maintains this level, demand from the rural sector bound to pick up.

The only question is: Which company will benefit the most? For Bajaj Auto, though, it would be difficult to snatch back its lost market share in the scooter segment from LML, but its new launches should enable the company to stop the haemorrhaging in market share.

As for LML, the pressure of costs is mounting steadily. During the period September 1997-April 1998, the average expenditure per unit was higher by Rs 930 or 4 per cent compared to figures in April1997-September 1998. At the same time, the average realisation per unit was lower by 6.4 per cent. As such, unless the company checks its cost, margins would continue to remain under pressure.

So far as the motorcycle majors are concerned, in the case of a sharp jump in demand, Hero Honda as well as TVS Suzuki are well positioned to exploit it fully.