Auto stocks slide on RBI rate hike

MUMBAI: Interest rate sensitive auto stocks on Tuesday ended in red, dragging the auto index on the Bombay Stock Exchange down by over 52 points after the Reserve Bank announced a hike in its key policy rates.

Reacting to the banking regulator's move, shares of most of the major auto companies ended in a weak terrain, with Tata Motors shedding the most. Fears of rising cost of auto dragged down shares of most of the companies.

"Some auto shares softened amid concerns that hardening interest rates could hurt sales," India Infoline Head of Research Amar Ambani said.

Shares of Tata Motors closed at Rs 1,153.90, down 1.41 per cent from previous close on BSE. Mahindra & Mahindra also emerged as the major loser with a decline of 1.14 per cent at Rs 757.15.

The country's largest car maker Maruti Suzuki witnessed a loss of 0.80 per cent to finish at Rs 1,496.65, while the two-wheeler major Hero Honda bucked the trend and settled with a gain of 0.65 per cent at Rs 1,852.25.

Significant fall in the auto counters also caused the decline in the 12-share BSE-Auto index, which ended at 9,952.29, shedding 52.55 points from previous close.

Other major losers in the auto pack were, Bajaj Auto (1.07 per cent) and Ashok Leyland (0.20 per cent).

The RBI today raised its key short-term lending and borrowing rates by 25 basis points each with immediate effect to tame inflation.

"The liquidity deficit would be contained within a reasonable limit to avoid disruption to economic activity, thereby prompting the need for easing measures in the current tight money market conditions" Fidelity Mutual Fund Portfolio Manager (Fixed Income) Shriram Ramanathan said.

Meanwhile, the 30-share benchmark Sensex witnessed a flat trading session and ended at 20,345.69, down by 9.94 points.