The valuation is based on Kotak's forecast of a Rs 36.5 crore net loss for Telco in fiscal 1999 from the earlier estimated net profit figure of Rs 49.6 crore.

Kotak has assigned an market underperformer rating to LML, while Bajaj Auto and M&M have been rated market performers. On the other hand, two-wheeler manufacturers, TVS Suzuki and Hero Honda, have been rated as outperformers based on an excellent earnings forecast for fiscal 1999. According to Kotak Securities, the EPS of these two companies is likely to see a quantum jump in the current fiscal.

The investment banker's preferred stock in the auto sector is clearly TVS Suzuki. The company's net profit estimates for fiscal 1999 have been revised upwards to Rs 88.9crore from the earlier estimated Rs 81.96 crore. The report says that TVS is expected to offer an attractive exposure both to the motorcycle segment as well as to good sales volume growth through fiscals 1999 and 2000. Earning per share is likely to rise by Rs 10 to Rs 38.5 in 1998-99 and further to Rs 41.5 in the ensuing fiscal.

Hero Honda is another scrip that Kotak Securities is upbeat on. The company is expected to perform well through fiscal 1999.

The estimated net profit figure for the company has also been revised upwards to Rs 111.9 crore from the earlier estimated figure of Rs 109.1 crore. Earning per share in 1998-99 is expected to rise to Rs 28 from Rs 19.2 last year.

Kotak expects M&M's first-half net profit to decline by 16 per cent to Rs 94.6 crore against Rs 112 crore in 1997-98. For fiscal 1999, the company's net profit is estimated at Rs 199.9 crore against Rs 251.5 crore last year. The report estimates Bajaj Auto's market share in both the scooter and the motorcycle segments to declinein the first-half of fiscal 1999.

While its market share in the scooters segment could decline marginally to 60.5 per cent from 61 per cent a year before, its market share in the motorcycle segment could drop from 27.8 per cent to 26 per cent. However, its market share in the moped segment could increase from 7.9 to 8.6 per cent.

Kotak estimates Bajaj's net profit during the current fiscal at Rs 504.2 crore against the earlier estimated net profit of Rs 511.4 crore. However, for the first-half, net profit is estimated to show a growth of 10.5 per cent to Rs 227 crore from Rs 205.4 crore reported in the corresponding period last year.