Seven auto stocks rose by 0.45% to 1.91% at 10:05 IST on BSE after the Reserve Bank of India in a surprise move, cut key policy rates by 25 basis points before trading hours today, 4 March 2015.
Meanwhile, the S&P BSE Sensex was up 268.49 points or 0.91% at 29,862.22.
Among auto stocks, Mahindra & Mahindra (M&M) (up 0.77%), Ashok Leyland (up 1.02%), Tata Motors (up 1.91%), Maruti Suzuki India (up 0.79%), Eicher Motors (up 0.45%), Hero MotoCorp (up 0.81%), and Bajaj Auto (up 0.63%) gained. TVS Motor Company fell 1.35%.
The BSE Auto index had underperformed the market over the past one month till 3 March 2015, falling 0.97% compared with 2.05% rise in the Sensex. The index had also underperformed the market in past one quarter, rising 2.15% as against Sensex's 4.05% rise.
Lower interest rates may help revive demand for vehicles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.
The Reserve Bank of India (RBI) has cut policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75% to 7.5% with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 6.5%, and the marginal standing facility (MSF) rate and the Bank Rate to 8.5% with immediate effect.
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The finance minister, Arun Jaitley in Union Budget 2015-16, presented on 28 February 2015, had announced hike in basic customs duty on commercial vehicles from 10% to 40% and effective rate from 10% to 20%. However, customs duty on commercial vehicles in completely knocked down (CKD) kits and electrically operated vehicles including those in CKD condition will continue to be at 10%. Jaitley proposed Rs 75 crore for electric vehicle manufacturing. The government announced Rs 79000 crore investment in infrastructure including construction of one lakh kilometres of new roads.
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