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Jan 29, 2013, 03.55 PM IST | Source: CNBC-TV18

Inflation key to next 25-50 bps rate cut in 4-6 mths: M&M

Pawan Goenka, President Automotive Sector of Mahindra & Mahindra (M&M), says that today’s RBI announcement on repo rate cut and CRR cut was on expected lines. He feels 25 bps rate cut is a good move and if inflation remains under control then one can see another rate cut of 25-50 bps in next four-six months.

I think many bankers said that they do expect the interest rates to come down and pass on this reduction to the consumer

Pawan Goenka

President Automotive Sector

M&M

Pawan Goenka, President Automotive Sector of Mahindra & Mahindra (M&M), says that today's RBI announcement on repo rate cut and CRR cut was on expected lines. He feels a 25 bps rate cut is a good move and if inflation remains under control, then one can see another rate cut of 25-50 bps in next four-six months.

Also read: More rate cuts possible if inflation behaves: Rangarajan

Below is the edited transcript of his interview to CNBC-TV18.

Q: Do you expect to see some improvement in auto sales and price for auto loans?

A: Today's announcement was on expected lines. We are happy with 25 bps reduction in repo rate and 25 bps rate cut in CRR.

I think many bankers said that they do expect the interest rates to come down and pass on this reduction to the consumer. If that happens, clearly, it is a move in the right direction. It is true that 25 bps by itself does not do much, but it is the signal that is coming. Signal that there is an expectation and a mood in RBI to ease out the interest rates and I hope that over next four-six months, one should see another 25-50 bps reduction provided inflation does not move in the reverse direction.

Q: You are correct that 25 bps will not alter my decision to buy a car or not buy a car but does that sentiment change for the ecosystem of ancillaries and small industries that you are conversant with. Does the feeling that things are on the mend lead to restocking and therefore, do you think we could see some bit of a V-shaped recovery at least in the first few months, for example this quarter?

A: This added with Budget will make the difference. So, need to watch and see what happens in terms of fiscal policies when the Budget is rolls out. If fiscal policy supports momentum towards growth, along with the monetary policy together then we should see a fairly positive momentum. So, this is in a way a precursor to what might happen to fiscal policy and two together should make a difference.

M&M stock price

On October 22, 2014, Mahindra and Mahindra closed at Rs 1260.70, up Rs 31.70, or 2.58 percent. The 52-week high of the share was Rs 1421.00 and the 52-week low was Rs 847.00.


The company's trailing 12-month (TTM) EPS was at Rs 59.61 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 21.15. The latest book value of the company is Rs 270.60 per share. At current value, the price-to-book value of the company is 4.66.

READ MORE ON  m&m, mahindra, auto, cars, loans, interst, rates, crr, repo, rbi
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