Auto stocks advance on hopes of tax rationalization in budget

Auto stocks nudged higher at 15:10 IST on BSE on hopes of tax rationalization in the automobile sector in the Union Budget slated on Thursday, 1 February 2018.

Eicher Motors (up 3.15%), Ashok Leyland (up 2.53%), TVS Motor Company (up 2.18%), Hero MotoCorp (up 1.72%), Bajaj Auto (up 1.73%) and Mahindra & Mahindra (up 0.89%) gained. Escorts (down 0.23%) and Tata Motors (down 0.1%) edged lower.

Meanwhile, the S&P BSE Sensex was up 273.04 points or 0.76% at 36,323.48. The S&P BSE Auto index advanced 1.72%, outperforming the Sensex.

The S&P BSE Auto index had underperformed the market over the past one month till 25 January 2018, sliding 3.4% compared with the Sensex's 6.22% rise. The index had also underperformed the market over the past one quarter, advancing 2.94% as against the Sensex's 9.1% rise. The index had also underperformed the market over the past one year, surging 16.38% as against the Sensex's 30.11% rise.

Among the slew of suggestions in its budget wish list, the Society of Indian Automobile Manufacturers (SIAM) has suggested that all passenger vehicles be kept under two tax rates under the GST vs. multiple tax rates levied currently.

Currently, small petrol cars (engine capacity less than 1,200cc) attract 28% GST plus 1% cess, diesel cars (engine capacity less than 1,500cc) attract 28% GST plus 3% cess and hybrid cars, including mid, large and SUVs, attract 15% cess.

The SIAM has once again moved the government to abolish the cess applicable on these categories, but it is likely that instead of an entire removal of cess, the government might look to standardise slabs, with fewer variations, reports suggested.

Maruti Suzuki India (MSIL) rose 4.07% at Rs 9,655 after net profit rose 3% to Rs 1799 crore on 13.9% rise in net sales to Rs 18940 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours on Thursday, 25 January 2018. The market remained shut on Friday, 26 January 2018 on account of holiday.

MSIL said that the board discussed and approved a revision in the method of calculating royalty which would result in lower royalty payments for new model agreements starting the Ignis. This would be implemented after approval by the board of parent firm, Suzuki Motor Corporation.

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