Auto stocks gain as RBI cuts repo rate

Seven auto shares rose 0.54% to 2.46% at 15:12 IST on BSE after the Reserve Bank of India in its monetary policy meeting today, 4 April 2019, slashed the policy repo rate by 25 basis points to 6% with immediate effect.

The S&P BSE Auto index was up 93.36 points or 0.49% at 19,256.46. It outperformed the Sensex, which was down 174.82 points or 0.45% at 38,702.30.

Bajaj Auto (up 0.62%), Eicher Motors (up 1.9%), Hero MotoCorp (up 2.01%), TVS Motor Company (up 0.66%), Tata Motors (up 2.46%), Escorts (up 0.36%) and Maruti Suzuki India (up 0.54%) gained. Ashok Leyland (down 0.34%) and Mahindra & Mahindra (M&M) (down 0.58%) fell.

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

The Reserve Bank of India (RBI) concluded its two-day Monetary Policy Committee (MPC) meeting today, 4 April 2019. On the basis of an assessment of the current and evolving macroeconomic situation, the MPC decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6% from 6.25% with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25%.

The MPC also decided to maintain the neutral monetary policy stance. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The RBI also lowered its GDP growth outlook for 2019-2020. RBI expects GDP growth at 7.2% for 2019-20, lower than its February projection of 7.4%. There are some signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India's exports, RBI said. According to the National Oceanic and Atmospheric Administration (NOAA) of the US, El Ni conditions strengthened during February 2019, which may affect the prospects of a normal south west monsoon, it added.

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