RPT-India's Maruti, Hero Honda see strong rise in sales

(Repeats story issued late on Monday)

By Janaki Krishnan

MUMBAI, June 1 (Reuters) - India's leading car and motorcycle makers reported strong annual rises in May sales, adding to a growing view that the economy has bottomed and may be improving after a run of aggressive interest rate cuts and stimulus steps.

Maruti Suzuki India (MRTI.BO), India's top car maker, on Monday reported May sales rose 15.8 percent from a year earlier.

Most of its sales were of fuel-efficient, compact cars, ranging from its best-selling Alto at the lower end to its recently launched Ritz hatchback and Swift at the upper end.

"I think the factors that are coming in is that in India, the economy is still growing by almost 6 percent... which is not a bad growth figure. Interest rates are now much more friendly than what they were earlier a few months ago," Chairman R.C. Bhargava told business news channel NDTV Profit.

State-owned banks had also resumed financing vehicle purchases, he said.

The Indian unit of South Korean carmaker Hyundai Motor Co (005380.KS), said its sales rose an annual 8 percent, boosted by exports especially to Europe, where countries have introduced discount incentives to trade in older cars. [ID:nBOM438516]

Leading two-wheeler maker Hero Honda Motors HROH.BO said May sales rose 22.5 percent from a year earlier. Demand was strong in semi-urban and rural markets, while product updates and launches also hooked customers. [ID:nBMA003025]

"Maruti and Hero Honda sales have been slightly better than expected," said Vaishali Jajoo, auto analyst with Angel Broking.

"Now with sales going up in the last four, five months, we see a trend developing... some indication that the market may be looking up," she said.

Mahindra & Mahindra (MAHM.BO), India's largest utility vehicles and tractor maker, said its sales fell an annual 18 percent in May, partly due to the shutdown of a plant because of a labour dispute. [ID:nBOM439172]

"SUVs (sport utility vehicles) are expensive and have higher excise duties. It will take some time for demand in this segment to pick up," said Jajoo.

Still, Mahindra's shares rose 5.25 percent on Monday to their highest close since Jan 18, 2008. Analysts expect the company's sales to pick up later this year, and expect it to realise benefits from its takeover of Punjab Tractors.

Shares in Maruti rose 1.8 percent and shares in Hero Honda ended up 1.9 percent.

The BSE Auto Index .BSEAUTO rose 1.9 percent, outperforming a 1.5 percent rise in the broader market .BSESN. The sector index has risen 92 percent so far this year compared to a 54 percent rise in the main index. (Editing by John Mair)