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Rate cut drives BSE Auto Index to all-time high

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The Bombay Stock Exchange () Auto Index closed at an all-time high on Thursday, buoyed by the lowering of interest rates and expectations of good sales growth. Gaining for a sixth straight day, the barometer for automobile stocks ended at 10,744.7, up two per cent, the most among all sectoral indices.

According to analysts, the positive sentiment towards auto stocks is on expectations that a strong momentum in volume growth would continue due to the easing of interest rates.

The Reserve Bank of India () surprised the market with a 50-basis-point cut in its on Tuesday. A few lenders have already started lowering lending rates.

Said Yaresh Kothari, auto analyst at Angel Broking, “Auto stocks are gaining on expectations of good sales growth in 2012-13, led by an easing in the interest rate-tightening cycle. Volume growth is likely to get a boost from consumers who had been postponing their purchases due to the high interest rates.”

“Double-digit volume growth is expected to continue this year as well,” said , managing director at KR Securities.

IN TOP GEAR
  BSE price (in Rs)
19-Apr
%chg* %chg**
319.35 3.15 79.01
Maruti Suzuki 1389.35 2.92 51.01
Hero MotoCorp 2192.75 2.42 15.09
M&M 706.25 2.01 3.40
Ashok Leyland 30.65 1.66 34.73
Cummins India 483.35 1.41 38.52
Bajaj Auto 1732.05 0.80 8.74
10744.73 2.05 31.94
Sensex 17503.71 0.64 13.26
*Change over previous close
** Change over December 30, 2011                 Data compiled by BS Research Bureau

“Going by the strong volume growth posted by companies in the previous three months, most auto companies will post good numbers for the March quarter,” he added.

The expects growth in passenger car sales to be between 10 per cent and 12 per cent this financial year.

Extending record sales in January and February, most auto companies had posted highest-ever monthly sales in March.

Since the beginning of this year, investors have turned bullish on the sector on robust sales performance. The BSE Auto Index has gained 32 per cent so far in 2012, outperforming the Sensex, which has gained a little over 13 per cent.

Tata Motors, the country’s largest commercial vehicle maker, has been the biggest contributor to the gains on the index. The stock, which constitutes almost a third of the index weightage, has gained 80 per cent since January 2012. Shares of Tata Motors closed at a record level of Rs 319.35 on Thursday, up 3.15 per cent. The company has benefited from the strong sales growth of Jaguar and Land Rover.

Maruti Suzuki has gained more than 50 per cent during this period. The scrip closed at Rs 1,389 on Thursday, up 2.9 per cent. The sentiment towards the stock has turned bullish ever since production resumed to normal after the recent labour unrest.

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