The scrips of automobile companies advanced on Monday, with the BSE Auto index surging to a one-month high, expecting tax sops announced by finance minister P. Chidambaram would boost auto sales and revive the sector in the near term.
Gaining for the second consecutive session, the BSE Auto index rose 0.76% (90.99 points) after the finance minister announced reduction in excise duty on cars, scooters, motorcycles and commercial vehicles, a move that would lower prices of automobiles from Rs 2,000 to Rs 80,000.
Market experts believe a lower excise duty on automobiles is a positive development for the sector, even as the vote on account was a non-event from the perspective of macro-economics and markets. Reduction in excise duty will boost the demand. The move comes at a time when automobile sales growth has fallen for the first time in 11 years, as slowdown in economic growth dampened demand for automobiles, they said.
?Lowering excise duty for certain ailing sectors like automobile and capital goods despite limited headroom has alleviated market jitters,? said Anup Bagchi, MD & CEO, ICICI Securities.
Excise duty on two-wheelers, small cars and commercial vehicles has been brought down to 8% from earlier 12%. SUVs will attract excise duty of 24% against 30%. Excise duty on large cars will now be 24% compared with 27% earlier, while the duty on mid-sized cars will go down to 20% from 24% previously. Geojit BNP Paribas Financial Services MD CJ George said, ?Reduction in the excise duty for auto sector is well appreciated as this industry has been struggling.?
Stock exchange data showed 11 out of 16 original equipment manufactures (OEMs) listed on the stock exchanges ended in green on Monday. TVS Motor (2.86%) and Mahindra & Mahindra (2.62%) were among the top gainers on Monday. Tractor manufacturing company VST Tillers settled 4.65% higher. Two-wheeler maker LML surged 4.85%.
Other companies like Hindustan Motors, Maruti Suzuki, Escorts Tractors, Eicher Motors and Hero Motocorp rose 1-4%.
