Auto stocks slide on sharp 50 bps rate hike by RBI
Auto shares fell 1-3% Tuesday on fears that higher than expected 50 basis points interest rate hike by the Reserve Bank of India will make loans more expensive and thus hurt already slow sales further.
July 26, 2011 / 12:46 IST
Moneycontrol Bureau
Auto shares fell 1-3% Tuesday on fears that higher than expected 50 basis points interest rate hike by the Reserve Bank of India will make loans more expensive and thus hurt already slow vehicle sales further.The RBI has hiked its repo rate as well as reverse repo rate by 50 bps as it continues its efforts to control high inflation.A hike in repo rate will increase lending costs of banks, which will in turn makes loans expensive, as banks will most likely pass on higher costs to consumers.Automobile sales accelerated over 30% in 2010-11. However, volumes have slowed to under 20% in the last several months, as consumers hit by high fuel prices and vehicle price hikes coupled with the rising interest rates have postponed their purchases."The auto stocks have reacted to this rate hike
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