Ashok Leyland to Samvardhan Motherson: Auto stocks rise after 50 bps repo rate cut in RBI MPC meeting

Stock Market Today: Auto stocks saw a sharp rise in trade on Friday, June 6, after the 50 bps repo rate cut announced by the Reserve Bank of India's (RBI) monetary policy committee (MPC) gave a leg up to the rate-sensitive sector.

The rate-sensitive sectors like auto get a boost as it reduces lending rates, which could spur passenger vehicle, two-wheeler and tractor sales. The Nifty Auto index was up around 1% following the RBI's bazooka in the form of an oversized rate cut.

Nifty Auto index sees smart gains

The Nifty Auto Index opened at 23,343.05, almost 1.6% higher than the previous day's closing price of 23,306.20 in anticipation of some rate cat announcement by the Reserve Bank of India.

However, the RBI Governor delivered a surprise repo rate cut of 50 basis points, coupled with a CRR or cash reserve ratio cut of 100 bps. A 100 bps represents a 1% change. 

The decisions by the RBI may lead to a swift reduction in the lending rates by the banks, and this in turn may lead to a pick-up in the automobile sales, which are facing a sluggish trend.

Key auto stocks gainers

The rise in the auto index was led by gains in Ashok Leyland share price, followed by Hero MotoCorp Ltd. Samvardhan Motherson stock also stood among key gainers.

Ashok Leyland share price gained almost 4% in the morning trade on Friday. Hero MotoCorp and Maruti Suzuki India share price also saw smart gains of 2-3%. Balkrishna Industries Limited shares were another key gainer, rising up to 2%.

Samvardhan Motherson share was also among the prominent Nifty Auto stock gainers.

Most other stocks saw gains of close to 1% or more. These included Bharat Forge Limited, Eicher Motors Limited, Bajaj Auto Ltd and TVS Motor Company.

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