Auto stocks decline after RBI keeps policy rates unchanged

Five auto stocks fell by 0.42% to 3.02% at 11:50 IST on BSE after the Reserve Bank of India after its policy review meeting today, 3 February 2015, kept policy rates unchanged.

Meanwhile, the BSE Sensex was almost unchanged at 29,122.83.

Among auto stocks, Mahindra & Mahindra (M&M) (down 1.52%), Bajaj Auto (down 3.02%), Maruti Suzuki India (down 0.5%), and Eicher Motors (down 0.42%), declined.

Hero MotoCorp dropped 1% after the company reported 0.4% fall in sales to 5.58 lakh units in January 2015 over January 2014. The despatches were severely impacted during the two-day long transporters' strike during January 2015, Hero MotoCorp said.

Ashok Leyland (up 0.08%), Tata Motors (up 2.71%), and TVS Motor Company (up 3.28%) gained.

Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

On the basis of an assessment of the current and evolving macroeconomic situation, the Reserve Bank of India (RBI) after its sixth bi-monthly monetary policy review today, 3 February 2015, decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75%. The cash reserve ratio (CRR) of scheduled banks also kept unchanged at 4% of net demand and time liabilities (NDTL). It has also decided to reduce the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22% to 21.5% of their NDTL with effect from the fortnight beginning 7 February 2015. The RBI has also decided to replace the export credit refinance (ECR) facility with the provision of system level liquidity with effect from 7 February 2015.

The Reserve Bank indicated that key to further easing are data that confirm continuing disinflationary pressures. Also critical would be sustained high quality fiscal consolidation. Given that there have been no substantial new developments on the disinflationary process or on the fiscal outlook since 15 January 2015, it is appropriate for the Reserve Bank to await them and maintain the current interest rate stance, RBI said.

The RBI had made surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review on 15 January 2015.

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