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Stocks of auto and consumer durables saw huge demand today, gaining as much as 8 per cent, in the wake of the government deciding to enhance capital infusion into the PSU banks to enable them provide cheaper retail loans.
Among the auto pack, TVS Motor Company Ltd jumped 8 per cent, followed by Tata Motors (5.77 per cent), Mahindra & Mahindra Ltd (2.32 per cent), Bajaj Auto (1.57 per cent), Hero MotoCorp (1.55 per cent) and Maruti Suzuki India (1.26 per cent).
Led by the gains in these stocks, the BSE auto index was trading higher by 2.03 per cent at 11,590.70 and was the best performer among the 13 sectoral indices during the morning trade.
Among consumer durables stocks, Bajaj Electricals gained 5.91 per cent, followed by PC Jeweller (5 per cent), Whirlpool (3.36 per cent) and Rajesh Exports (2.47 per cent). The BSE consumer durables index rose by 1.28 per cent to 5,967.52, with the help of gains in these stocks. Ahead of the festival season, public sector banks will provide cheaper loans for auto and consumer goods purchases with a view to stimulating demand.
Banks would lower lending rates as the government yesterday decided to provide additional funds to the PSU banks to enable them financing of auto and consumer goods purchases. The decision to increase the quantum of capital infusion to the banks was taken at a meeting between Finance Minister P Chidambaram, RBI Governor Raghuram Rajan and Economic Affairs Secretary Arvind Mayaram in New Delhi yesterday.
"This amount (Rs 14,000 crore provided for capital infusion in Budget) will be enhanced sufficiently.
The additional amount of capital will be provided to banks to enable them to lend to borrowers in selected sector such as two-wheeler, consumer durables, etc at lower rates in order to stimulate demand," a finance ministry statement had said.
Consumer durables, a reflection of demand for manufactured products, include TV, fridge, washing machine. Meanwhile, the BSE benchmark Sensex was trading flat in the late morning trade at 19,890.71, down about 5 points.