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View on Auto Sector; Eicher Motors, MRF among Top Gainers

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View on Auto Sector; Eicher Motors, MRF among Top Gainers

According to some industrialists sector and analysts, India will continue to be a small car market. Small cars including hatchbacks and compacts in the price range of Rs 5-8 lakh account for more than that of the car bazaar. Car manufacturers were apprehensive about in the run-up to the announcement on goods & services tax rates, due to this price-sensitive segment. As it turns out, the GST Council did well to make the transition revenue neutral and small car buyers will not see much difference in prices come July 1. A GST of 28% plus 1% less for petrol cars will not be much of a change from the current effective tax of 29% on small cars.

Considerably, though, GST could well provide a boost to the aspirational segments like mid-sized sedans and sports utility vehicles especially at the luxury end that combined account for just 25-30% of the market. According to the advisors, the SUVs will offer a real alternative and a further boost to the car industry.

It is believed that for the first two months of the current fiscal year, SUV sales grew by 16% over a year ago, to 1.4 lakh units. The removal of hybrid vehicles from the lower tax bracket has bewildered many manufacturers that had started working on a series of alternatives for the future. Hybrids might have offered segregation for the executive segment but they have now become weak with GST rates on average with fossil fuels like diesel and petrol.

Various auto stocks like Ashok Leyland, Eicher Motors, MRF and Bharat Forge were trading with gains in afternoon trade on Tuesday. The sectoral index was up. At around 12.20 p.m., the BSE Auto index was trading 0.26 per cent up at 24,653. On Tuesday, it was noted that the shares of Bajaj Auto, Tata Motors, Bosch, Exide Industries, Motherson Sumi Systems, Hero MotoCorp and Cummins India were also in the green in the auto index.

On the other hand, shares of Maruti Suzuki India and Mahindra & Mahindra were trading in the red at that same time.

In January, it was observed that the country’s Industrial activity expanded 7.5 percent. Earlier it was just 7.1 percent in December.

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