Auto sector dips after RBI maintains rates

8 Feb 2024 , 12:00 PM

Shares of automobile players such as Maruti Suzuki, Eicher Motors, M&M, and Tata Motors witnessed declines of up to 2% on February 8 following the Reserve Bank of India’s (RBI) policy announcement.

The RBI’s monetary policy committee (MPC) opted to maintain repo rates at 6.5% for the sixth consecutive time. Despite this, the Nifty auto index has shown a gain of over 7% since the beginning of the year, contrasting with the benchmark Nifty’s 1% increase.

RBI Governor Shaktikanta Das upheld the policy stance of ‘withdrawal of accommodation’ during the first monetary policy meeting of 2024. While the inflation forecast for 2023-24 was retained at 5.4%, the projection for the current quarter was revised downward to 5% from the previous estimate of 5.2%.

The decision of the RBI MPC comes amid India’s inflation rate remaining below 6% for four consecutive months since September 2023, albeit still falling short of the 4% target. In December 2023, the retail inflation rate stood at 5.69%.

Highlighting the economic landscape, RBI Governor Shaktikanta Das noted that rural demand continues to gather momentum, urban consumption remains robust, and the investment cycle is picking up pace due to increased capex.

Domestic economic activity continues to demonstrate strength, with growth for the current fiscal year estimated at 7.3% according to the NSO. Additionally, the projected real GDP growth for 2024-25 stands at 7%, with growth rates of 7.2% and 6.8% anticipated for the June and September quarters, respectively.

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