However, some analysts say that the expectations of a turnaround in the commercial-vehicles sales is pre-mature and unjustified at this juncture as freight rates, which are a prime indicator of the demand, have shown no signs of firming up.

The rates were up in October but have come down again to pre-October levels. Analysts are of the opinion that for a meaningful recovery in vehicle demand, any freight rate increase needs to stabilise over a three month period to boost sentiment among truck operators and induce fresh purchases. As per a BSE member,``The increase in sales have been primarily on account of huge order from army and the discounts offered by Telco in the past few months (on its entire range of vehicles).'' However, these discounts are not sustainable in the long run. The recent Ministry of Finance proposal on reducing excise rates on commercial vehicles to 10 per cent from 15 per cent is nominal and will only reduce the extent of discounts offered by Telco. Another analystpoints out that the market is reading too much in Telco's higher procurement orders. As Telco had gone slow on its production in the first half of the current year and reduced inventory to minimal levels, the procurement had been lower.

``As the inventory level drops, procurement orders will naturally pick up.'' According to another Delhi-based NSE member,`` Unless the trend of higher production levels continue till January, nothing can be said. It is better to adopt wait and watch policy in this case.''