Auto stocks decline on buzz govt may not extend tax breaks beyond 31 Dec

Auto stocks declined by 0.14% to 1.22% at 9:55 IST on BSE on reports government will not extend tax breaks to automakers beyond 31 December 2014.

Meanwhile, the S&P BSE Sensex was up 63.21 points or 0.23% at 27,466.75.

Among auto stocks, Tata Motors (down 0.14%), Maruti Suzuki India (down 0.39%), Ashok Leyland (down 0.87%), Mahindra & Mahindra (M&M) (down 1.22%), Hero MotoCorp (down 0.16%), Bajaj Auto (down 0.78%) and TVS Motor Company (down 0.3%) declined.

The BSE Auto index had outperformed the market over the past one month till 30 December 2014, declining 2.8% compared with Sensex's 4.5% fall. The scrip had also outperformed the market in past one quarter, rising 5.27% as against Sensex's 2.9% rise.

The decision reportedly comes at a time when weak tax receipts in a sluggish economy are making it difficult for India to meet its ambitious fiscal deficit target of 4.1% of gross domestic product for the fiscal year ending 31 March 2015 (FY 2015).

In February this year, the Congress led UPA government in its interim budget had reduced excise duty on automobiles for a limited period until 30 June 2014. Later, the new BJP government which came to power in May this year extended the concessional excise duty on automobiles until 31 December 2014. The excise duty on small cars, scooters, motorcycles and commercial vehicles was cut to 8% from 12%. The same for SUVs (sports utility vehicles) was slashed to 24% from 30%, while on large cars it was reduced to 24% from 27% and mid-sized cars to 20% from 24%.

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