Auto stocks drop after RBI monetary policy

Nine shares from auto sector fell by 0.5% to 2.61% at 12:15 IST on BSE after the RBI slashed the policy repo rate by 25 basis points and hiked reverse repo rate by 25 basis points in its monetary policy review today, 5 April 2016.

The Reserve Bank of India (RBI) announced its first bi-monthly monetary policy during market hours today, 5 April 2016.

Tata Motors (down 1.82%), Bajaj Auto (down 1.79%), SML Isuzu (down 2.4%), Escorts (down 2.61%), Ashok Leyland (down 0.5%), Maruti Suzuki India (down 1.18%), Mahindra & Mahindra (M&M) (down 1.38%), Eicher Motors (down 1.88%) and TVS Motor Company (down 1.79%) edged lower. Hero MotoCorp rose 0.19%.

The BSE Auto index was down 1.19% at 17,877.24. It outperformed the Sensex, which was down 1.33% at 25,062.18

The BSE Auto index had outperformed the market over the past one month till 4 April 2016, rising 6.56% compared with Sensex's 3.06% rise. The index, however, underperformed the market in past one quarter, falling 1.11% as against Sensex's 0.87% fall.

On the basis of an assessment of the current and evolving macroeconomic situation, the RBI has decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) from 6.75% to 6.5%. It has reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 95% of the requirement to 90% with effect from the fortnight beginning 16 April 2016, while keeping the CRR unchanged at 4% of net demand and time liabilities (NDTL). The RBI has narrowed the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps by reducing the marginal standing facility (MSF) rate by 75 basis points and increasing the reverse repo rate by 25 basis points, with a view to ensuring finer alignment of the weighted average call rate (WACR) with the repo rate. Consequently, the reverse repo rate under the LAF stands adjusted to 6% and the MSF rate to 7%. The bank rate which is aligned to the MSF rate also stands adjusted to 7%, RBI added.

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