Shares of automobiles companies are on a roll with the Bombay Stock Exchange (BSE) auto index hits all-time high of 10,546 in early morning trades on expectations of interest rate cut.
In a surprise move, the Reserve Bank of India (RBI) first time in three years reduced the repo rate - the rate at which it lends overnight funds to banks by 50 basis points to 8% in its annual monetary policy review yesterday to boost the sagging economy.
The availability of cheaper funds is expected to spur individuals to spend more and business to increase investment, according to the analyst.
The BSE auto index, the second largest gainer after consumer durable index, is trading higher by 1.8% or 187 points, compared to less than 1% gain in the benchmark index Sensex.
All frontline automobile stocks such as Bajaj Auto, Maruti Suzuki, Ashok Leyland, Mahindra and Mahindra and Hero MotoCorp are trading higher by 1-4% on the BSE. Tata Motors is trading at its new lifetime high of Rs 308, up 2.3%.