Hero Honda witnessed much oscillation on Friday as it came under selling pressure after a rally in early trades. 

At the time of writing this piece, Hero Honda was down 3.1% to Rs 196.70, a 52-week low .

Volumes on the counter, though, were substantial, at 7.13 lakh shares, on BSE, indicating no respite to the selling in the stock.

On Thursday, the stock had plunged 5.7% on heavy volumes of 10.1 lakh shares. It has now lost 12.5% in four trading sessions from Rs 224.95 on 24 March 2003.

As per market buzz, Morgan Stanley is offloading on the counter.

The current weakness in Hero Honda manifests on rumours that the company's vehicle sales for the current month will be dismal, in line with the general industry trend. The low sales volumes are estimated on the basis of poor demand from rural areas, which, in turn, is due to a bad monsoon that has hit rural incomes adversely.

Hero Honda's woes centre around a high base effect due to its strong growth in the past and stiff competition in the executive segment of the motorcycle sector. Hero Honda derives 80% of its revenues from the Splendor-Passion combine in the executive segment - the most crowded section of the motorcycle market.

The company's inability to diversify from this segment through new launches in the economy or power segments has proved a major problem. The Dawn and Ambition models from the company's stable have failed to break Bajaj Auto's dominance in the economy and power segments respectively.

Hero Honda recently scaled down its FY 2002-03 vehicle sales target to 1.7 million bikes from the earlier 1.8 million bikes. In the April 2002-February 2003 period (11 months), the company's sales volumes rose by 21.08% to 1.56 million units from 12.89 lakh in the year-ago period.

For the third quarter ended 31 December 2002, Hero Honda registered a 14.7% rise in net profit to Rs 152.8 crore (Rs 1.52 billion), compared to Rs 133.22 crore (Rs 1.33 billion) in the corresponding period of the previous year. Net sales increased by 12.8% to Rs 1,376.04 crore (Rs 13.76 billion) from Rs 1,219.47 crore (Rs 12.19 billion).

Recently, Japan's Honda Motor said that it will renew the technical pact with Hero Honda. The promoters - Munjals (Hero Group) and Honda Motor Company - hold a 26% stake each in Hero Honda. The Hero Group had inked the technical agreement with Honda Motor in 1984, which was renewed in 1994 and now comes up for renewal in June 2004.

BSE code: 500182